This Week: Judging Economic Policy If you net out all the assets and liabilities in an economy, you’ll find that the nation’s accumulated stock of real investment is the only thing that remains. That’s the central driver of a nation’s productivity, and the true basis for a nation’s wealth. Broadly defined, it includes a nation’s accumulated stock of real private investment (e.g. housing, capital goods, factories), real public investment (e.g. infrastructure), intangible intellectual capital (e.g. education, inventions, organizational knowledge and systems), and its endowment of basic resources such as land, energy, and water. Encourage, incentivize, and protect all of those, and you’ll find an economy that delivers prosperity. Fail to encourage productive investment at every level, and you’ll find an economy in long-term decline. The primary source of failure in the U.S. economy over the past 15 years has been a policy environment aimed at encouraging consumption over productive investment. Those policies have been dominated by the Federal Reserve’s quest to punish saving, fuel debt-financed consumption, and produce an illusory “wealth effect” from financial speculation. If you’re looking for the root of U.S. economic stagnation, there’s your trouble. By John P. Hussman, Ph.D. President, Hussman Investment Trust
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