What is getting at them is the fact that manufacturing is definitely weakening while consumption spending still surges ahead. This is a paradox that the Keynesian and monetarist schools are unable to deal with. The present condition of manufacturing left Federal Reserve governor Roger Fergus arguing that traditional indicators like capacity utilisation are now becoming less useful as measures of resource scarcity. Meaning he doesn't know either. Prell followed the usual line that large increases in household wealth generated by the booming stock market has fuelled consumer spending and the demand for housing.
Assets rise in value which makes households wealthier which then fuels their consumption spending.
This was followed by the suggestion that there had been a shift toward investment in less durable equipment with the result that it now needs larger amounts of gross investment to get the same addition to the capital stock. To begin with, the 'asset price-driven wealth effect' is a complete furphy. A household can only use an increase in asset values to increase its consumption by either selling assets or borrowing against them. Either way, it is patently obvious that for the alleged 'wealth effect' to operate on a national level there would have to be a monetary expansion. Yet Fed operatives, Wall Street economists, media commentators, etc., are totally blind to this possibility.