“Secular stagnation” in graphics: Doom and gloom

Posted: November 20, 2014 in economy
Tags: , ,

“SECULAR stagnation” is not a new idea. It was first popularised by Alvin Hansen, an economist and disciple of John Maynard Keynes, in the stagnant 1930s. Hansen thought a slowing of both population growth and technological progress would reduce opportunities for investment. Savings would then pile up unused, he reasoned, and growth would slump unless governments borrowed and spent to prop up demand. Following the economic boom of the 1950s, interest in the hypothesis dwindled. The theory is now popular again, thanks in large part to a 2013 speech by Larry Summers, an economist at Harvard University, in which he suggested that the rich world might be suffering from “secular stagnation”. Even as asset bubbles inflated before the financial crisis, growth in the rich world’s economies was hardly breakneck, suggesting a lack of productive investment opportunities. And there are a number of reasons to think it has since become harder to invigorate growth.

Adherents of the theory of secular stagnation emphasise different factors. Demography is one. An economy’s potential output depends on the number of workers and their productivity. In both Germany and Japan, the working-age population has been shrinking for more than a decade, and the rate of decline will accelerate in coming decades. In Britain, the population will stop growing in coming decades while in America, …

via Economic Crisis http://ift.tt/1p2JLC1

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