08 July 2014

I Hate Neil Irwin

Well, only metaphorically, of course. A few days back, I referenced a Business Section piece he did on why the Almighty Buck is so, since he was confirming previous postings in these endeavors. Fine. As I looked at my dead trees Times this morning I nearly fainted. There, on the front page, above the fold, full right side column, was Irwin. You don't get a much better placement than that. Damn his eyes!!

Cut to the chase: he concludes, and quotes Bernanke for support, that The Giant Pool of Money persists due to The Masters of the World being unable or unwilling to make real investment.
Worldwide, more money is piling into savings than businesses believe they can use to make productive investments.

Well, no shit Sherlock. But, credit where credit is due, he spikes the banksters' complaint:
But while central banks can set the short-term interest rate, over the long run rates reflect a price that matches savers who want to earn a return on their cash and businesses and governments that wish to invest that savings -- whether in new factories or office buildings or infrastructure.
What if the problem is not too much savings, but a shortage of good investment opportunities to deploy that savings? For example, businesses may feel that capital expenditures are unwise because they won't pay off.

In other words (the ones used here for so long), in the long run real return is determined by growth in real productivity of real assets. No new science, no new engineering, then no return. All that's left is non-consumption, and that's a zero-sum game.

Mr. Bernanke himself has been wrestling with the possibility that the original framing of a global savings glut got the problem in reverse. "I may have made a mistake in trying to assign a name," Mr. Bernanke, now at the Brookings Institution, said in an interview. "A glut means more than is wanted. But it doesn't necessarily arise because people want to save more. It can be because they invest less."

The "they" is the borrowers, to be clear.

Neither Irwin nor Bernanke, as quoted, address why it is that real investment opportunities are not manifest. To the extent that the .1%-ers demand that 10% income from their stashes of moolah, and governments permit them to extract it from their macro-economies, we'll spend a long time in a New Dark Age. The difference is that this one won't have a renaissance of new knowledge to end it. We need a Robo Cop.

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