Monday, January 04, 2010

Structural Shift

I think ultimately what the elite policymakers have failed to realize is that they can't just reinflate the bubble a bit and hope for good times to return. I have no idea through what channel anyone thinks various business tax credits and incentives could cause anything other than higher profits in a period of excess capacity and recession. Krugman:
During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore. What’s left? A boom in business investment would be really helpful right now. But it’s hard to see where such a boom would come from: industry is awash in excess capacity, and commercial rents are plunging in the face of a huge oversupply of office space.