The investment strike is one the government would do well to bust
The private sector’s refusal to invest ensures that household and business suffer inflation, while the economy stagnates

The British economic slump has now lasted four years, and output is still 4.5% below the previous peak level. The decline in gross fixed capital formation accounts for nearly 80% of the fall in output. The slump is driven by an investment strike, that is, a refusal by the private sector to invest. As a result, a cut in interest rates is unlikely to have any material effect. Firms are saving, not borrowing.

The investment strike has also curbed growth in key sectors. The pound fell by around 30% in 2008 and has recovered only a proportion of that ground since. Yet exports have barely risen in the intervening period. In a cautionary tale for all those advocating currency devaluation as a panacea, the performance of the British economy shows that the positive impact has been negligible. Instead, the decline in imports has been three times greater than the rise in exports. The improvement in net exports (exports minus imports) is because British consumers and British firms have simply been priced out of world markets.

etc, etc… “You simply must have a flutter, for the good of the nation.”

The investment strike is one the government would do well to bust | Michael Burke | Comment is free | guardian.co.uk.