Private net investment is currently running far below the rate required to sustain a rapid rate of economic growth. Real consumer spending, in contrast, peaked in the fourth quarter of 2007, fell only slightly (about 2.5 percent) to the second quarter of 2009, and by the fourth quarter of 2010 exceeded its previous quarterly peak (by almost 1 percent). Despite the wailing and gnashing of teeth among Keynesian economists and politicians with regard to allegedly inadequate consumption, a collapse of consumption is not to blame for the economy’s anemic recovery to date. However, looking elsewhere for the cause, we find that the economy’s true engine of growth – private business net investment – continues to sputter, running in the most recent quarter at less than a third of its previous peak rate and, for the entire year 2010, at only 40 percent of its rate for the entire year 2007.
He looks at this sequence of numbers, net private investment, investment in new capital equipment: The negatve numbers occurred right at the crash. Notice the drop from 335.5 to 158.7 on the far left just as we crashed? Now look at the latest numbes on the far right, dropping from 269.9 to 144.3:
| 335.5 | 158.7 | -52.9 | -118.8 | -95.7 | -9 | 106.1 | 186.8 | 269.9 | 144.3 |
As my hoards of readers know, I have increasingly pointed to the gains from production, which are dropping. I have pointed out that producers collapsed at the crash, though I admit to being back and forth on the issue.
Keynes is dead wrong, the producer end collapsed because they have less flexibility when using energy, and energy shortages occured on July 2008, and the financial crash followed a month later.
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