Daily Note – What happened to investment?

Russia BankSummary

Markets: The dearth in investment and the global round-up
Russia: Ruble weak because of surprise rate hike
United States: Durable goods orders disappoint
China: Domestic China stocks surge
United Kingdom: GDP in line with expectations

 

Good morning,

If you have studied economics to any extent, one word will be constantly in your lexicon: equilibrium. However, capitalism is not a system built on stability, certainly not in a macroeconomic sense. It needs momentum.

Former British Prime Minister Ted Heath summed it up well: “The alternative to expansion is not an England of quiet market towns linked only by trains puffing slowly and peacefully through green meadows. The alternative is slums, dangerous roads, old factories, cramped schools, and stunted lives.”

Investment creates momentum because it is designed to add to the economy’s output in the future. You invest when you think things are going well and you believe that demand in the future will be robust, so you spend now in order to reap later.

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Global Macro-Daily Note 28th July 2014

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