Thomas Grennes & Andris Strazds highlight the contraction in US private investment since the GFC:
Recent evidence…….suggests that while U.S. GDP growth has surpassed its pre-crisis level, investment has been declining. A comparison with China would not be appropriate due to differences in growth rates and the level of economic development, but even a comparison with the EU-15 is not flattering to the U.S. A look at the Gross Fixed Capital Formation to GDP ratio shows that since the onset of the financial crisis in 2007 the U.S. has been lagging behind the EU-15 countries with respect to investment in long-term assets…….
The chances of China successfully switching from an export-driven economy to internal markets are small. And the US is unlikely to materially lift exports. So their conclusion appears unavoidable.
If insufficient investment results in the U.S. having to adjust by lowering consumption rather than increasing output, the rest of the world will also have to adjust in a way that is reducing growth; namely, produce less.
via EconoMonitor : Thoughts From Across the Atlantic » The U.S. Is Sliding Down an Investment Slope.
Reblogged this on ZYNKIN NEWS.
So when you are bogged down in a long term recession, why would you expect private investment not to decline? A focus on job growth and unemployment figures, rather than GDP, answers the question and suggests the solution. Putting people back to work will create demand for good & services, which will spur private investment again. Only demand will do this (monetary measures have not been enough); US companies are smart enough to know that capital investment is foolish as long as prolonged lack of demand shows no signs of abating. Just wait: EU-15 countries will have to follow suit if demand continues at the same level or lower.
The conclusion above from EconoMonitor, to just throw in the towel and accepted slow growth, suggests complete naivety and lack of historical knowledge. It’s difficult to understand why so many oblique ideas and theories are proposed when the solution is so obvious. Almost implies someone out there is paying them not to find an the answer.