The Map and the Territory by Alan Greenspan — SEVEN | UNCERTAINTY UNDERMINES INVESTMENT

1. 1. Private construction has been a major contributor to every recovery out of recession since 1949 except that of 2009.
2. 2. The cap-ex ratio, measuring business commitment to illiquid equipment and structures, fell to its lowest peacetime annual level since 1938 in 2009.
3. 3. Households showed aversion to long-term assets, with the ratio of illiquid home purchases to gross savings falling to a quarter-century low in 2010.
4. 4. The rise in nonfinancial corporate profitability from spring 2009 through end 2010 resulted almost wholly from cost-saving investments, not capacity expansion.
5. 5. The yield spread between 30-year and 5-year Treasury bonds is the most useful measure of uncertainty beyond five years, and it has been at historic highs.
6. 6. The collapse in construction from 2008 to 2011 created a two-tier economy: over 90% of GDP operating near potential, but construction operating at barely half of potential.
7. 7. Greenspan argues that the persistence of uncertainty and risk aversion after 2009 is largely due to widespread government activism, not just the initial collapse.
8. 8. The deep divide among economists is whether free markets are self-correcting or require significant regulatory direction and fiscal stimulus.
9. 9. Government policies that prevent market liquidation assume fear can rise indefinitely, but selling climaxes show markets do not fall without limit.
10. 10. Bailouts of General Motors and Chrysler set a precedent that no area of the economy is beyond federal responsibility, distorting market outcomes.
11. 11. Greenspan draws parallels between post-2008 policy activism and New Deal interventions, which he argues suppressed recovery in the 1930s.
12. 12. The enemy of economic recovery, now as then, is uncertainty, which depresses long-term asset investment.