The Key To Growth: My Comment To The Wall Street Journal Opinion, "The Fed Surrenders"

My posted comment to the The Wall Street Journal Opinion, "The Fed Surrenders: The central bank underscores the slow-growth reality:"

Low interest rates expand the economy primarily through housing. Fed data shows that from the end of 2013 to the end of 2016Q1, total mortgages dollars, by all holders, for 1-4 family residences increased less than 1.3 percent over the entire period, or about 0.6 percent per year.

Net private domestic business investment, in nominal dollars and not inflation adjusted, has been declining for the previous year, from $557 billion to $439 billion at 2016Q1. The post recession peak of $559 billion in 2015Q2 was below 2000Q2 peak of $565 billion. $565 billion in 2000 is equivalent to $785 billion in 2016 on an inflation adjusted basis.

Bursting of the housing bubble might explain the lack of interest in homes. It does not explain the lack of business investment. Without business investment, there has been and will be many fewer new business formations and little or no wage and employment growth.

The key to growth is increasing domestic private business investment. The Fed is powerless here.