This is the most frightening economic chart I have seen in the last decade.
Net private investment, which includes spending on everything from machine tools to new houses, minus depreciation, fell to 0.1% of gross domestic product in the second quarter of 2009, according to the latest government data. That’s the lowest level since at least 1947.
Capitalism’s most vulnerable point is the death spiral of overcapacity. In the easy credit boom times we built too many malls, too many car factories, too may fast food joints, too many houses. Now the only way for businesses and consumers to survive is too cut back drastically.
That creates a chicken-and-egg problem at a time when the unemployment rate is already nearly 10%: Without more jobs, U.S. consumers will have a hard time increasing their spending; but without that spending, businesses might see little reason to start hiring Read more…