Last week, in Is Capital Creation Beating Capital Consumption, we asked an important question which is not asked nearly often enough. Perhaps that’s because few even acknowledge that capital is being consumed, and fewer tie it to the falling interest rate (perhaps that is because the fact of the falling interest rate is, itself, controversial). At any rate, we showed a graph of Marginal Productivity of Debt.
We said that this shows that consumption of capital is winning the race. And promised to introduce another new concept to explain why.