A full page article in the FT a few days ago claimed that "experts are struggling to explain a great puzzle of the US economy." It went on to note that since the late 1980s, new investment in the US has all but stalled. Corporate profits are at record highs, but big companies just aren't investing the money in the kind of things that will bring them future streams of profits.
To some this seems, as the article says, "profoundly odd". High profits suggest that it is easy to make money, while low interest rates mean that capital is "dirt cheap". All economic logic suggests that companies should be borrowing and investing as fast as they can. Instead, they are sitting on cash, and if they are borrowing, they are often doing it to finance stock buybacks, one of the most value destroying pieces of idiocy Wall Street has yet come up with (see my previous columns on this).
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