--- Jordan Hayes <jmhayes at j-o-r-d-a-n.com> wrote:
>
> A simple answer is that you keep paying for them (in current
> reductions of profit) via depreciation but you don't generate
> revenue to match.
Not sure that this works in the glorious new world of EBITDA. Depreciation is a non-cash item -- that's part of how these companies sustained their huge valuations in the first place. (as an aside, I'm currently having a really nasty argument with a couple of telecoms analysts over the stupidity of talking about earnings before interest, tax and depreciation when the context is european telcos which are loaded up with their interest bill and looking down the barrel of frightening capex).
I sort of get Doug's point that the inventory of old capital stifles investment demand -- I know this is orthodox economics, but it's one of those bits which just never seems to stick in my head, rather like the way that a lot of people have trouble with comparative advantage.
It would, of course, have the implication that what the economy needs is for all the shiny new servers and workstations bought by the dot bomb company should be stacked up in a pile and torched like so many pigs with foot & mouth disease, lest anyone be tempted to use them. Which is a rather pleasing image to my mind, though it has been an uncommonly tough week.
d^2
===== For the stronger we our houses do build The less chance there is of being killed
-- William McGonagall.
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