Thursday, August 29, 2013

Log of Real Fixed Private Investment (and Trends)

Hover the mouse over the graph to see the trend lines I sketched in...

Graph #1: Fixed Private Investment, Deflated, Log of it.

Looks like investment growth trended at one rate right up to 1980, and at a slower rate thereafter. I don't imagine I'm the first guy to say that. But I do want to point out that the growth of Real GDP shows a similar slowdown right around 1980.

Of course. It makes sense that if economic growth slowed in 1980, the driver of economic growth also slowed around that time. It makes sense. The thing is, nobody says it. No. For example, Scott Sumner says this:

growth was slowing almost everywhere in the 1970s and 1980s

and this:

growth in US living standards slowed after 1973

After 1973? Yeah, about seven years after 1973.

Between the 1974 recession and the 1980 recession, Graph #1 shows FPI increasing faster than at any other time since 1960. Growth was strong after the 1974 recession. Growth didn't slow, then. Growth didn't slow until Paul Volcker suppressed inflation and disposed of the corpse of vigor.

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