Once again the Wall Street Journal makes me sad.
In a front page article today, Timothy Aeppel, Jon E. Hilsenrath and Ellen Byron declare that “Despite Piles of Cash, Businesses Get Stingy About Spending,” as the title says. Their main source of evidence? A graph covering less then the past ten years. From 1996 to 2000, company investment exceeded cash from operations, peaking at a difference of about $400 billion in 2000. A year later, the difference is virtually zero. The article claims failure: something isn’t adding up. Why aren’t companies doing what they did in the 90s?
When will reporters (and the general public for that matter) learn that economic growth isn’t something that happens formulaicly. Economics isn’t physics—it’s filled with variables that are near impossible to even estimate accurately not to mention ones we never would think of considering. The dotcom boom of the 90s was a one-of-a-kind event. We were lucky. You just can’t make that happen with some tax cuts and interest rate fiddling. Investing about what you make is the norm, not cause for concern or a sympton of some grand uncertainly that’s eeking out of every corner of our society. This isn’t complicated stuff here.