>I must confess to the guilty secret that I have always had a blind spot
>for this argument. I've never been able to understand how physical
>objects can be a drag on the economy merely by existing. I can see how
>they are worthless, but the "overhang" argument seems to suggest that
>surplus capital effectively has negative output. Unless you make what
>I would have thought were absurd assumptions about space constraints,
>surely it could just be ignored? Hell, there's always the option of
>putting a couple of sticks of dynamite under the bloody things if
>overhang is so pernicious.
It's not the existing physical stuff that's the problem - a lack of closet space in the macroeconomy. It's that the overhang makes businesses less likely to buy new stuff, and since investment drives the business cycle, it's bad news for growth. So the tech boom was in part fueled by dot.com's buying Cisco routers and Oracle software. Now, there's a lot of almost-new routers on the market, which are a lot cheaper than truly new ones - though in a year or so, they'll probably be ready for the landfill. And Oracle's customers are staying away in droves.
Doug