Tere is a reason their 'mentality' changed...its not a virus; its not magic...there is a 'rational basis.' I think it is a rational response to the fiscal context. What do you think it is. Do you think companies hoard money to be mean. Or might it be that they think ivesting capital in TBills at 1% is the best risk adusted return at the time.
Of course it is rational and very intuitive. They aren't doing it to be mean. Just acting in their own self interest. They are obviously using capital in a manner that they deem to be the best risk adjusted return. You keep insisting that fiscal policy is the main driver. I disagree. Current fiscal policy isn't encouraging people to pay down their mortgage at an accelerated rate. They are doing it because the home dropped in value and they want the peace of mind that their home will not bankrupt them. The same is true with businesses. They found themselves in an over-leveraged situation with no retained earnings or free cash flow. They were thus unable to withstand a economic contraction. In aggregate, domestic businesses cut back on everything to the point where they could barely meet demand. As revenue increases, they are only expanding to match increased demand and the rest goes to pay down debts or is retained as cash reserves. An adjustment in fiscal policy isn't going to fix this without causing another bubble. A small reduction in rates isn't going to make much difference. Consumers are acting prudently. Expansion in the credit markets was out of control and it is currently correcting. A large reduction in rates would have an effect, but might be entirely offset by a country that is no longer able to meet it's debt obligations. If you've ever spoken with someone who lived through the 1930's, they are very driven to save money and pay cash for things. As a whole, that generation doesn't like debt. They've lived through a dozen different Administrations each with different fiscal policy. You don't ever hear them suggest that they didn't take out a loan because Clinton's tax rates were too high. They went through an experience that influenced the way that they view money. The same is true today albeit to a lesser extent.