US Capital Stock Gets Older

11/3/2013

Via FT.

Three years ago (May 2010) interviewed with a portfolio manager for a job, I told him that aggregate demand would stay depressed and growth rates low, because the rise in debt had lead to an investment in overcapacity. I told him that while I didn't know what the average age of the capital stock was, my guess was that it would be around 15, and that therefore we would need at least 10 years before investment would rebound and become an underpinning source of strength in the US. I also told him that unemployment would remain high and that the investment corporations would be doing all over the world would be to shed workers.

I didn't get the job. But I gave you Sage advice didn't I Brad?

10 Comments

Brent Buckner

11/6/2013 02:12:15 am

How are you reconciling the linked article stating,
"as a consequence of depressed levels of business investment over the past six years, the age of the US capital stock is at a record high" and it's chart showing aging of the capital stock (almost straight line from 2000 to 2010, and in 2010 greater than any time since at least 1970)
with your statement:
"the rise in debt had lead to an investment in overcapacity"?

Karl

11/6/2013 02:29:06 am

New housing is included in investment.

Brent Buckner

11/6/2013 03:00:38 am

Thanks.

Per the linked article, in 2010 the U.S. capital stock average age was already at a high since (at least) 1970 - that wouldn't have made for an obvious argument that the average age would continue to increase for 10 more years. Lots of stuff hiding in aggregation.

Kal

11/6/2013 02:54:20 am

I would also note that much of the global overinvestment in capacity was generated in China and Japan -something I oft cited in my blog.

Zerohedge has another link today which has Chinese officials being concerned about overcapacity.
http://www.zerohedge.com/news/2013-11-06/china-admits-it-has-overcapacity-bubble

Karl

11/6/2013 08:58:33 am

Off the top of my head : US investment as measured by GDP has been getting older since 2001 this would certainly coincide with the idea that US corporations have been offshoring to places like China and wouldn't of necessarily be measured in terms of US GDP
They have also been offshoring profits to tax havens like the GC.

Now if actual investment both home and abroad is measured in that chart then the overinvestment in the US was limited to the housing market.

Brent Buckner

11/23/2013 02:50:32 am

Fatas draws his declining trendline from 1980:
http://fatasmihov.blogspot.com/2013/11/saving-glut-or-investment-dearth.html

Similarly, one chart underlying your link shows declining net U.S. business investment as percentage of GDP since 1981 or 1982:
http://ftalphaville.ft.com/files/2013/11/CSFig91-e1383328133434.png

Brent Buckner

11/23/2013 02:50:44 am

Brent Buckner

11/23/2013 02:51:01 am

Brent Buckner

11/23/2013 02:51:14 am

Brent Buckner

11/23/2013 02:53:44 am

I apologize for the multiple copies of that comment - the site was telling me that it hadn't posted and was asking me to try again.

US Capital Stock Gets Older

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