Keystone Kops & Deficient Demand

Domestic capital spending has been very slow to recover in the U.S. following the official end of the previous recession. Why is this the case?

Deficient demand, that's why. People are pessimistic. Their pessimism leads them to cut back on spending. And because everyone cuts back on spending, there is little incentive to hire new workers or start new capital projects. This means lower incomes for workers, which leads them to cut back even more on spending. Fear has become a self-fulfilling prophecy.