>Behind the boom are historically low rates of investment in business. In
>absolute terms, investment appears to have recovered since the low-point
>of 1992. But compared to GDP, private investment has only risen from 10
>per cent to 12 per cent in 1997, way below the 15 per cent of 1989.
>According to the Bank of England 'the rate of return on capital is at
>near record levels and hence we would expect business investment growth
>to be higher' but instead 'the higher share of profits absorbed by
>dividends [means] the more likely firms are to face restraints on
>investment spending'. As less is invested, more is available for luxury
>goods.
U.S. profits are high, and investment has risen along with them, but instead of paying dividends, firms have been borrowing rather heavily to take each other over and buy their own stock. Rentiers are still sucking money out of production in the U.S., but in different ways from their British comrades.
Doug