Liquidity Without Leverage

_{^{IN PARTNERSHIP WITH}}

Capital has quietly flooded back into the American financial system in recent months. The money supply, after a rare contraction and subsequent plateau, is once again on the rise—buoyed by expansive fiscal measures, robust inflows into markets and funds, and an ongoing abundance of bank reserves. The S&P 500 taps record highs, money market fund assets crest at historic levels, and cash holdings at major corporations near multi-year peaks.

Yet beneath this surface of abundance, core metrics of economic vitality—real investment, capital expenditures, and labor productivity—remain stubbornly flat. With business owners, savers, and retirees watching from the sidelines, a question looms: What good is liquidity, if it does not create leverage?

By almost any measure, money is plentiful again. M2 has climbed back above $22 trillion, money-market funds hold a record $7.4 trillion, and corporate cash piles remain near historic highs. The Federal Reserve calls reserves “ample,” and the numbers support the claim.

Corporate America mirrors that comfort. Cash on S&P 500 balance sheets tops $1 trillion, and buybacks have approached another $1 trillion this year as firms choose to return capital rather than reinvest it.

Yet abundance hasn’t produced momentum. Credit is available and rates have eased, but capital spending is flat across most industries. Only a few large technology and infrastructure companies are still building aggressively, while smaller firms continue to hold back. Liquidity is abundant; leverage is missing.

Why has easy money failed to ignite productive risk-taking? The answer lies in a shift of collective psychology—a “missing” risk appetite. Companies and investors, with cash on hand and ample funding options, remain cautious. Share buybacks and savings take precedence over genuine expansion. According to the latest S&P 500 data, buybacks, though off their highs, remain concentrated among the top 20 firms, signaling a preference among leaders to shield earnings rather than reinvest in uncertain growth. Capex growth, where it exists, is narrowly focused on sectors aligned with near-term technological trends or supply-chain resilience, not broad-based innovation.​

Several factors conspire to dampen conviction. Demographic shifts toward older, capital-rich cohorts foster savings over reinvestment. Debt aversion, following a period of market volatility and rising rates, leaves both business owners and retirees favoring safety. Persistent policy uncertainty—the debate over tariff rates, fiscal initiatives, and taxation—adds another layer of hesitation, as decision-makers await clearer signals before committing capital.​

Even as markets roar and funding remains accessible, a subtle but consequential change has taken hold: risk is shunned until it appears manifestly “safe.” Financial comfort reigns, but the willingness to bet on long-term productivity—on new plants, new skills, and new business models—remains elusive.

The consequences of liquidity without leverage are most visible in America’s productivity statistics. While quarterly volatility persists, the underlying trend shows only minimal gains. Over the past year, labor productivity grew just 1.5%, less than historical averages and below levels seen in more dynamic boom phases.​

Business investment, where it matters most for growth, remains flat outside select tech leaders. Output per hour—a bellwether of efficiency—crept up only marginally, and unit labor costs continue to rise, reflecting wage pressures rather than genuine efficiency improvement. Demographically, a tightening labor pool and aging population compound the challenge, as the number of workers grows slowly while experience and adaptability decline.​

Meanwhile, so-called “AI spending”—the latest tech wave—has yet to show up durably in aggregate GDP statistics. The build-out of infrastructure may promise future gains, but for now, these investments concentrate among a few giants and raise more questions than answers about broad economic impact. Real productivity growth remains elusive, suggesting current investment is more about defensive positioning rather than a bet on transformative returns.​

America in late 2025 is awash in money, but short on conviction, innovation, and efficiency. Financial comfort does not equal economic vitality. The rise in liquidity soothes markets and portfolios, but absent leverage—absent the courageous deployment of capital toward productive risk—the system breeds stagnation, not resilience.

For business owners, retirees, and savers alike, the lesson is clear: Liquidity may comfort markets, but only leverage builds the future.

Deniss Slinkins,
Global Financial Journal