THE global economy is suffering from an unusual problem: the supply of savings exceeds the demand to utilise them, so causing some interest rates in the developed world to become negative and prices to fall (deflation rather than inflation), and so, for GDP growth to remain well below its potential.Since much of the savings are made by companies in the form of retained earnings and cash, the question then arises: why are companies saving as much as they are rather than using their cash and borrowing power to demand more plant and equipment that would add helpfully to both current spending and future production?In the US, where an economic recovery from the recession of 2008-09 has been well under way for a number of years, fixed investment spending (excluding spending on new homes), having recovered strongly, is now in decline and threatens slower GDP growth to come.With the cash retained by nonfinancial corporations, the financial assets on their balance sheets has come to command ...
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