Marilyn Nieves We've had an economic boom in the US over the past 18 months. The boom has been fueled by investment, in AI obviously, but also in manufacturing and infrastructure. Additionally, deferred budgetary spend at the state and local government level has added to the strength of the economy.
The capital fueling the investment boom is primarily from government borrowing during the pandemic that accumulated as excess private savings post-pandemic. There is also foreign capital flowing into the US, as evidenced by a strong dollar. Some of the capital coming in is foreign direct investment and some is the reshoring of capital by domestic companies.
There are three characteristics observable in most economic booms, and we have all three today. First is technological advances (AI). The second is asset price appreciation (Nasdaq, cryptocurrencies and to a certain extent residential real estate).
Third is capital investment (debt raised at the federal level, reshoring, foreign capital flows). I’m sure there is some leverage leaking into the system from appreciated assets, but this seems tame today relative to past economic booms. Some notable periods of past game-changing economic advances are global trade: (1720s - South Sea Company), railroads (1840s UK, 1880s US), assembly lines (1910s US), internet (late 1990s), AI (2023-present).
Some notable periods of asset appreciation, which can fuel economic booms through leveraged investment and malinvestment: Tulips (1630s), rea.
