The Engine of Economic Growth Is Running, but Hardly at High Speed
By Robert Higgs • Monday October 1, 2012 5:02 PM PDT • 12 Comments
Real private fixed investment—the main driver of genuine economic growth—has recovered less than half of its loss between 2006 and 2010. As of the second quarter of this year, the amount of real private fixed (i.e., not including inventory) investment had barely recovered enough to exceed the low point it hit during the dot.com bust ten years ago. It has yet to reach the local maximum it attained before that bust. By historical standards, the current recovery of private investment is extraordinarily weak. To find anything similar, we must go back to the Great Depression of the 1930s.
Along with my colleague Mary Theroux and others at The Beacon and elsewhere, I have argued for years that this anemic investment recovery evinces, at least in part, the prevailing regime uncertainty brought about by the Fed’s and the Bush and Obama administrations’ massive, ill-advised, and counter-productive interventions in the economy during the past five years. These interventions are continuing, however, and continuing to prolong the recovery. The idea that these actions will ultimately succeed if only the authorities persist in them long enough and on a sufficiently great scale was a bad idea from the start, and its bankruptcy became fairly evident a long time ago even to many observers wedded to mainstream economics and conventional economic policy making.
Policy makers have cost the U.S. economy a decade or more of normal economic growth. How long will people in their capacities as political and financial actors continue to tolerate this foolish, destructive policy making? I do not know, but I believe I know what the result of these misguided ongoing experiments will be—economic stagnation at best, relapse or another bust at worst.
Tags: Business, Economics, Federal Reserve, Politics 
It feels more and more like the “lost decade” that Japan suffered through. As far as regime uncertainty goes, it would appear that many businesses are waiting to see if Obamacare will be repealed or if it will be fully implemented.
Believe All Things | Oct 1, 2012 | Reply
Could it be be that the Power Elite wants to intentionally bankrupt America? Could it be that the Power Elite wants a nation of citizens dependent on the state for their livelihood and or survival? Could it be that,through bankruptcy,America will be forced into a New World Order One World Government controlled by these same Elitists? There is no doubt that America is already bankrupt both fiscally and morally. With the Welfare/Warfare State strangling the American Economy,there is only a small amount of time before America will collapse and be thrust into the status of a nation of debt serfs.
libertarian jerry | Oct 2, 2012 | Reply
As of the second quarter of this year, the amount of real private fixed (i.e., not including inventory) investment had barely recovered enough to exceed the low point it hit during the dot.com bust ten years ago.
Only if you include residential investment, which is typically associated with households not the business sector.
Fixed investment ex-residential has recovered 70% from the 2009 trough.
So what is your prescription to get the residential investment sector, which has recovered 8% from the trough, out of its alleged “regime uncertainty” funk?
marmico | Oct 2, 2012 | Reply
If you also divide by US population, it’s 1995 with no ambiguity.
http://research.stlouisfed.org/fredgraph.png?g=bjJ
D. F. Linton | Oct 2, 2012 | Reply
I wonder how long the jail term is for not filing income taxes? Seems like a cot and three hots is becoming preferable to being a slave to the Fed (provided you get your own cell, to say the least).
bill | Oct 11, 2012 | Reply