online.wsj.com
And an insightful interview with Marty Barnes of BCA including this exchange...
Q: What do you point to when you say that?
A: There are a lot of things and data you can point to. Mainly, if you look at the data on the capital stock, which the Federal Reserve publishes in its flow-of-funds report, the growth in the capital stock is the lowest it has been in the postwar period. The capital stock is the stock of equipment and software in the corporate sector. All the investment that is made over the years adds up to how much capital you have and whether it is machines or computers or whatever. Relative to gross domestic product, the capital stock is not particularly high by historical standards. The rate of return on capital has been rising recently and is still reasonably high by historical standards. The capacity-utilization rate is low, but that is just a measure of manufacturing and it is driven by the business cycle. It is a short-term problem, and there is no evidence it is a structural problem. The Fed has put a lot of resources into looking at this issue, too, and it couldn't come up with any clear evidence there was a big overhang of excess capital. Companies bought a lot of computers and information-technology equipment in the run-up to Y2K, but a lot of that stuff is obsolete now. It has depreciated. It needs to be replaced. The capital stock now turns over so fast that you have to keep investing just to keep in place. But, in fact, net investment as a percentage of gross domestic product -- investment minus depreciation -- is as low as it ever gets. So there has been a dramatic cutback in corporate capital spending, and that matters, that has an impact. |
