Why would a business invest if there's no demand?

You're caught in the same bind as those on my "side". Money is cheap (if you qualify), and it makes sense to invest when your competition is afraid to, labor is cheap, inflation is low, why not invest now? Because there isn't enough demand. You've got to be able to generate the cash flow to pay down the loans, even if the loans are cheap. Without sufficient customers, you're not going to invest in your business.

So investment isn't going to magically happen on its own.

I'm not saying invest in housing and try to reinflate the bubble. We both agree that more needs to be spent on infrastructure. Lots of other things need to be bought which will get money into the economy and help things recover sooner. That'll gradually build a floor under housing and increase the rate of recovery.

It's not going to be easy to increase demand, but it's not going to happen on its own. Krugman was right - the stimulus/recovery act spending needed to be bigger because the federal government is the only entity that can increase demand now.

FWIW.

Cheers,
Scott.

Post #332,119 by Another Scott 9/1/10 8:01:00 AM Reply	Why would a business invest if there's no demand? You're caught in the same bind as those on my "side". Money is cheap (if you qualify), and it makes sense to invest when your competition is afraid to, labor is cheap, inflation is low, why not invest now? Because there isn't enough demand. You've got to be able to generate the cash flow to pay down the loans, even if the loans are cheap. Without sufficient customers, you're not going to invest in your business. So investment isn't going to magically happen on its own. I'm not saying invest in housing and try to reinflate the bubble. We both agree that more needs to be spent on infrastructure. Lots of other things need to be bought which will get money into the economy and help things recover sooner. That'll gradually build a floor under housing and increase the rate of recovery. It's not going to be easy to increase demand, but it's not going to happen on its own. Krugman was right - the stimulus/recovery act spending needed to be bigger because the federal government is the only entity that can increase demand now. FWIW. Cheers, Scott.
Post #332,122 by boxley 9/1/10 8:13:28 AM Reply	true statement You've got to be able to generate the cash flow to pay down the loans, even if the loans are cheap. printing money isnt going to do it either. Government employment for everyone isnt going to stimulate demand or pay off the debt Any opinions expressed by me are mine alone, posted from my home computer, on my own time as a free American and do not reflect the opinions of any person or company that I have had professional relations with in the past 55 years. meep
Post #332,134 by beepster 9/1/10 10:35:39 AM Reply	You're getting there you've almost figured out how dismal the forecast really should be for the US. Sure, understanding today's complex world of the future is a little like having bees live in your head. But...there they are.
Post #332,137 by Another Scott 9/1/10 11:08:08 AM Reply	Eh? I've been with Krugman with our hair on fire for a long time. I haven't been yelling as often as he has, though. Cheers, Scott.
Post #332,138 by beepster 9/1/10 11:11:33 AM Reply	Krugman is wrong :-) Start your own camp. Sure, understanding today's complex world of the future is a little like having bees live in your head. But...there they are.

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