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Secular StagnationPK

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Last fall at the IMF, Larry Summers took an idea severalpeople had been playing with and took it to the next

level

He resurrected the old concept of secular stagnation

Lets look at his argument:

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In the 90s, we had a huge stock bubble

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In the naughties, we had a huge housing bubble

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But inflation stayed low and the economy only felt like fullemployment at the bubble peaks

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My version: the economy only stayed afloat thanks toan unsustainable rise in leverage

Household debt as %of GDP

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Normal macroeconomics looks like this:

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But for more than five years it has looked like this

What if this isnt a temporary condition?

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Real interest rates may be trending downward, sez the IMF

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Slowdown in underlying growth?

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All of this harks back to an old tradition

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What does this imply for policy? IMF (and my comments)

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Or maybe this

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Or maybe stuck at the zero lower bound for a very long time