Two years ago, I blogged about the impressive level of cash reserves public entities have on hand for investment. These levels have only continued to grow over the last two years and I do not expect that trend to change into 2019.
The nationwide level of cash reserves held by public entities of all sizes tops $2 trillion, double the size of the U.S. treasury holdings of the Chinese government.
I reiterate this point, given the growing concern over the last two weeks of the possible sale of U.S. treasuries by the Chinese in response to the recent tariffs imposed by our country on China goods.
Currently, a majority of public funds held in American banking institutions are at rates lower than the present rate level paid by U.S. treasuries. In addition, such deposits are not fully available for banks to lend against, making them expensive and the least desirable banking deposits.
Just consider if public entities took the proactive approach of buying U.S. treasuries: our dependence on China would diminish, while our public entities would become more financially stronger by securing higher interest rates on lower-paying deposits—all while staying legal, safe, and liquid.
At three+one we work hard to stay ahead of the trends in the changing landscape of banking and the U.S. economy.
Because cash is an asset—and worth more in today’s market—public entities can take advantage of its greater earning potential while staying within all legal and liquidity guidelines.
Who would have thought that our local communities would have the power to head off a Chinese threat and earn more for the people they serve?
If you would like to learn more about how your entity can optimize the earning power of its available cash, contact us.