Drowning in Capacity

Let me flow into the ocean
Let me get back to the sea
Let me be stormy and let me be calm
Let the tide in, and set me free
--The Who

That capital spending in the US is at notably low levels should not be a surprise. Interest rates have been driven lower by central bank policies for three decades:

This secular decline in cost of credit motivated diligent borrowing and spending by US corporations. We now face an overbuilt situation, with potential supply out of balance with demand:

Moreover, by borrowing more to live better in the present, we have saved less, thus depleting resources that could serve as capital for future productivity improvement. With current debt so high, it will be difficult to rebuild savings while paying back loans.

Corporations also face regime uncertainty, which further discourages net capital investment.

Given the present environment of high debt, low savings, low capacity utilization, and significant regime uncertainty, the real surprise would be an extended increase in real investment.

Basic economic laws suggest that the chances of such a surprise are low.