The American economy has been dependent on government spending. Even Walmart has been seeking guidance after the Payroll Tax Cut expired. One might ask why that is the case?
After the Global Economic Collapse of 2008, Wall Street took their money and ran. They haven't engaged investment to improve unemployment. Why is that? It is completely counter intuitive to any real desire for profits. Research investment always leads to new economic opportunities, job growth and profits. So, why is it Wall Street isn't interested in investment?
I have a theory. What if lack of job growth actually provides simply cheap money to the financial sector. That is what is occurring. The low and absent interest rates of The Fed actually fuels market growth and profit without economic improvements.
Two things happen when Wall Street doesn't invest; no job growth and continued investment by government to improve the economy. So, why would Wall Street invest in anything? They want to let the governments of the world take all the risk and responsibility while they sit on their nest egg and wait for the next best thing to happen out of government investment.
Basically, why use their capital when they don't have to?
This economic collapse was not only engineered for Wall Street profits, it continues to be.
Dean Baker
April 7, 2013
...Construction has also been rising rapidly, (click here) albeit from a very low base. The continuing weakness in construction should not be surprising. The building boom of the bubble years has left the country with an enormous oversupply of housing. Vacancy rates are still near record highs, in spite of being down from peaks reached in 2009-10.
This huge backlog of vacant homes will prevent construction from returning to normal (not bubble) levels for several years.
The Federal Reserve's low interest policy deserves serious credit here. This has made it much easier to buy homes than would otherwise be the case. It also has put money in the economy through refinancing. If we assume that the average mortgage interest rate has fallen one percentage point as a result of Fed policy, it means that homeowners have an additional $80 billion (0.5% of GDP) to spend each year....
