Free exchange: Still, not stagnant

Posted: March 5, 2015 in economy
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The new nuclear age

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Free exchange


Economic history suggests that talk of American secular stagnation may be overblown

IS AMERICA stuck in a rut of low growth, feeble inflation and rock-bottom interest rates? Lots of economists believe in the idea of “secular stagnation”, and they have plenty of evidence to point to. The population is ageing and long-run growth prospects look dim. Interest rates, which have been near zero for years, are still not low enough to get the American economy zipping along. A new paper published by the University of Chicago’s Booth School of Business, however, reckons that secular stagnation is not quite the right diagnosis for America’s ills.*
A country in the grip of secular stagnation cannot find enough good investments to soak up available savings. The drain on demand from these underused savings leads to weak growth. It also leaves central banks in a bind. If the real (ie inflation adjusted) “equilibrium” interest rate (the one that gets an economy growing at a healthy …<div class="og_rss_groups"></div>

via Economic Crisis


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