Thursday, July 15, 2010

Data is dangerous

Because accurate information can lead to findings like Erin's:
Corporations are not investing here. Fixed investment by private non-financial corporations peaked in the third quarter of 2008 and has fallen since then. By the first quarter of this year, investment was one-third below the pre-crisis peak.

Corporate Canada is hoarding cash. The Canadian-dollar deposits of private non-financial corporations shrank during the first two quarters of the financial crisis, but then grew during the next four quarters, reaching an all-time record high in the first quarter of this year.
...
Four months ago, I suggested that low capacity utilization explains sluggish investment. If corporations already have a lot of idle capacity, why invest in adding more capacity? A week ago, Paul Krugman presented the same interpretation for the US.

Corporate tax cuts will be especially ineffective at promoting investment given the overhang of excess capacity. As I argued, it would be better for the government to retain the money and invest it directly.
Now wouldn't we all be happier if we didn't know better, and had to take the Cons' word that our chocolate rations investment levels have been doing nothing but improving thanks to their glorious leader?

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