"Is it possible that the US and other major global economies might not return to full employment and strong growth without the help of unconventional policy support? I raised that notion – the old idea of “secular stagnation” – recently in a talk hosted by the International Monetary Fund.Summers följde upp denna ledare, och ett nytt anförande på American Economic Association-konferensen, med en ny ledare i FT 5 januari 2014: "Washington must not settle for secular stagnation".
My concern rests on a number of considerations. First, even though financial repair had largely taken place four years ago, recovery has only kept up with population growth and normal productivity growth in the US, and has been worse elsewhere in the industrial world.
Second, manifestly unsustainable bubbles and loosening of credit standards during the middle of the past decade, along with very easy money, were sufficient to drive only moderate economic growth. Third, short-term interest rates are severely constrained by the zero lower bound: real rates may not be able to fall far enough to spur enough investment to lead to full employment.
Fourth, in such situations falling wages and prices or lower-than-expected are likely to worsen performance by encouraging consumers and investors to delay spending, and to redistribute income and wealth from high-spending debtors to low-spending creditors.
The implication of these thoughts is that the presumption that normal economic and policy conditions will return at some point cannot be maintained. Look at Japan /..."
Ryan Avent kommenterar 6 januari på Free Exchange Summers analys, som han sammanfattar så här:
"Imagine a world, he said, in which resources are increasingly concentrated in the hands of those with high propensities to save and low propensities to invest: reserve accumulating foreign governments, for example, and the very rich. In that world, the real rate of interest that clears the market—that balances savings and investment and therefore ensures that no willing workers are left unemployed—could fall to and remain at very low levels.Avent konstaterar att Summers policyrekommendation för att komma ur denna fälla är stora offentliga investeringar, men lyfter själv istället fram: högre inflation. Han skriver bl a:
It could fall to such a low level that the central bank would need to keep its policy rate near zero to clear the market; with interest rates near zero, asset prices would soar, such that a full-employment equilibrium inevitably meant a dangerous rise in financial instability. Alternatively, the market-clearing interest rate could fall below zero, leaving the central bank unable to move its policy rate low enough to generate adequate demand and trapping the economy in a prolonged slump. The evidence of our senses, and the judgment of bond markets, appears to strongly support this story, said Mr Summers."
I whole-heartedly agree with Mr Summers that seizing the opportunity now offered by bond markets to make lots of useful public investments is a win-win-win idea. Probably win-win-win-win. But the evidence strongly suggests that a higher inflation target would in fact make life much easier for "stagnating" economies by generating adequate demand. To argue that adequate demand would necessarily lead to unmanageable financial risks seems a bit of a stretch to me. In the 1970s America's growth outlook was as lousy as it had been in decades and real interest rates fell into negative territory. Yet somehow America dodged dangerous financial instability and crisis.Krugman kommenterade 16 november Summers IMF-tal; hans kommentar är att han gör samma analys själv men att Summers framställer den bättre. Krugman avslutar sin krönika: "What Larry did at the IMF wasn’t just give an interesting speech. He laid down what amounts to a very radical manifesto. And I very much fear that he may be right."
Bruegel Blogs Review har en översikt från 25 november här.
John Cassidy på New Yorker kommenterade 8 januari. Han skriver i början av sin kommentar:
"Having written two books about bubbles, I’m sympathetic to the point that Summers is making, which is essentially a reiteration of the argument that Alvin Hansen and other American Keynesians put forward in the late nineteen-thirties and early forties. However, the way Summers framed the argument, in terms of interest rates, and, particularly, the “natural interest rate”—a concept borrowed from Knut Wicksell, a Swedish economist who lived around the turn of the twentieth century—has caused some unnecessary confusion. To try and clarify Summers’s thesis and illuminate its strengths and weaknesses, I’ll recast it in a way that should be more familiar: in terms of supply and demand."Uppdatering 30 oktober 2014
Gavyn Davies visar att BNP-tillväxttakten i de rika länderna sjunkit sedan 1960-talet och menar att detta beror på två saker (1) långsammare befolkningsväxt (2) långsammare växt i arbetsproduktiviteten.
Is economic growth permanently lower?", 25 oktober
Lawrence Summers, "Reflections on the new 'secular stagnation' hypothesis", voxeu 30 oktober