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Gross Private Savings minus Gross Private Investment
In the figure below, I show two series. The red line (left scale) is nonresidential fixed investment spending – basically, business investment — as a percentage of GDP, from the BEA. The blue line (right scale) is the output gap — the percentage difference between real GDP and the CBO’s estimate of potential real GDP. (via Why Isn’t Investment Higher? - Paul Krugman Blog - NYTimes.com)
Martin Wolf explains why extra government borrowing will be met by increased private (mostly corporate) savings, à-la Japanese lost decade. In general it makes a lot of sense, even though it makes two strong assumptions:
On private corporation deleverage, The Economist has a good article on this week print edition (“Show us the money”) on increased cash generation by US and UK companies, due to lower investments.
