UBS economist Drew Matus was on Bloomberg
TV with Tom Keene this morning discussing the U.S. economy – and one
rarely-discussed trend in particular that is somewhat alarming.
Matus told Bloomberg TV that the decline of the U.S. capital stock is a bad sign:
Matus told Bloomberg TV that the decline of the U.S. capital stock is a bad sign:
I would say that one of the
things that people have generally ignored is that the U.S. capital stock
is in decline. This is the first time post-war we've ever seen it. We
don't know what the repercussions are because we have nothing in
history to look back on and say, "Hey, last time it did this, this is
what followed on it."
I would submit to you, though, that it's probably nothing good.
The capital stock Matus is referring to is American
companies' investments in new equipment and software – one of the four
main components in GDP – less the depreciation of existing equipment.
The implication of a drop in the capital stock is that
potential growth is much lower than it could be if businesses were
investing more in new capital. As a result, economy-wide return on
assets can be expected to be much lower, UBS economist Sam Coffin told Business Insider.
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