It's the Capital Formation!

[phattonez]

Blue line is net fixed investment.
Red line is personal consumption expenditures.

Any questions?

 

[washunut]

Blue line is net fixed investment.
Red line is personal consumption expenditures.

Any questions?

Have the definitions kept up with the economy. Facebook is now a $100 billion market cap. It has bought some servers etc, but much of their investment is in people. Hard to compare to an economy of 25 years ago when companies put much of their investments into buildings and equipment to grow.

 

[Joe Steel]

Blue line is net fixed investment.
Red line is personal consumption expenditures.

Any questions?

Yes.

What's you point?

Are you admitting capitalism has failed?

 

[imagep]

It's not capital formation. it's the use of capital for business expansion purposes that dropped so suddenly and still hasn't recovered. It didn't drop so suddenly because there suddenly was none, it dropped because consumer sales dipped, and thus there wasn't the need for businesses to expand, plus companies projected bad times ahead so they started hoarding money. Then as companies started laying off their least productive employees, and started trying to manage their businesses better to keep profits up, they again found that they had little need for capital investment because productivity was increasing without it, and increasing at a faster rate than demand was increasing.

Until demand starts increasing faster than productivity, businesses will have little need to increase capital investment. And likewise, until the unemployment rate drops below 5%, wages will not climb quickly, maybe not even at the inflation rate or the interest rate that it would cost companies to borrow for capital investment, thus there will be little need for additional capital investment.

 

[phattonez]

Umm, I don't know what graph you're looking at, but consumption expenditures are growing at their historical rate.