The Donald’s “Golden Age” Comes A Cropper

Click on Title to Read

Let us repeat. A CapEx spending boom driven by a massive stock market bubble rather than organic economic development on main street is not evidence of a strong economy. And that’s to say nothing of the purported Golden Age of the Donald’s fevered imagination.

For want of doubt, recall what happened during the late 1990s dotcom bubble. For nearly seven years from Q3 1993 through the bubble peak in Q2 2000, real gross private domestic investment rose at a robust 9.5% per annum rate. Moreover, after a minor setback during the shallow 2001 recession, it surged further to a peak of $2.89 trillion in Q1 2006.

But thereafter came a deep cyclical collapse and a long dry spell. Accordingly, the Q1 2006 domestic investment peak was not reached again until Q2 2013. That meant during the 13 years after the dot com bubble peak in Q2 2000, real domestic investment grew at just 1.1% per annum, representing a 88% plunge in the trend rate of growth.

As the man said: “Can you say payback?”

Still, that’s what inevitably happens when the Fed money printers stimulate an egregious bubble on Wall Street that, in turn, gives birth to an artificial, unsustainable capital spending boom on main street.