Paul Krugman notes (following Floyd Norris) that in spite of soaring profits, the investment share of GDP is falling. This is very bad news for the economy, although it is not the first time it has happened. Net investment as a share of output actually peaked in the 70s, when the profit share was at its lowest point in the post-war era. There has been very little relationship between profit shares and investment shares over the last thirty years.
Krugman also notes the productivity slowdown over the last 11 quarters, now that the annual rate for the first quarter looks likely to come in around 0.5 percent. This slowdown is more than can be attributed to the failure of firms to invest their profits, although the lack of investment is surely a contributing factor.
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