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Inflation? Have You Seen All That Excess Capacity?

Matt Yglesias flagged a sober point (among many) in Martin Wolf's latest column

Higher prices of gold reflect fear, not fact. This fear is not widely shared. The US government can borrow at 4.2 per cent over 30 years and 3.4 per cent over 10 years. During the crisis, the inflation expectations implied by the gap in yields between conventional and inflation-protected securities collapsed. These have since recovered – yet another sign of policy success. But they are still below where they were before the crisis. The immediate danger, given excess capacity, in the US and the world, is deflation, not inflation.

Indeed. Which gives me the opportunity to point you to the most interesting (if oblique) excess-capacity indicator I've seen lately, from Tuesday's Wall Street Journal:

And while companies are finding the credit-market thaw is making it easier to borrow money they would need to expand, many are stashing these funds rather than spending them. Of the 100 largest bond issues globally this year, only seven listed expansion, investment, capital expenditures or research and development as the purpose of the money-raising, according to Dealogic.

It sounds like companies are turning to the credit markets to refinance existing debt rather than add an already daunting supply of idle equipment and underused facilities: 

Many industries have excess capacity that, even if the economy perks up, will take many months to absorb. Mike Arnold, president of the bearings and power transmission group at Timken Co., says his company was running at only 35% of capacity as of the end of the second quarter.
Last month, Timken successfully raised $250 million through a bond issue, but the funds will be used to refinance long-term debt maturing in February. The company slashed its capital expenditures by more than half in the first six months of this year compared with the same period a year ago. Mr. Arnold says it has no plans to boost spending anytime soon.