Friday, September 09, 2011

It's the investing -- or lack of it

Most people have pretty good recall of when and where they were at the moment of auspicious events, such as 9/11.  Other indelible recollections are with respect to personal moments.  This sounds way beyond nerdy, but one of those moments for me was sitting in an econ class at U Penn in the late 1960s and (finally) figuring out that, whereas there was pretty good theory and evidence for household consumption expenditures, our understanding of business investment expenditures was not anywhere close to that.  In fact, the latter are more volatile and subject to hard-to-quantify business-people's mood swings.  "Animal spirits" is too glib.

But the cliche is that as most of demand comes from consumers, we have to get them to spend.  Robert Higgs shows here that consumers are spending, but it is business owners that are not.  Will Obama's latest make a difference in that department?  There has not been a rousing reception at today's NYSE where the Dow shed over 300.  I know that there is plenty of economic worry all over the world, but bidders also jump all over good news when they sense it.