Newell Palmer: Monthly Economic Notes – August 2019

Newell Palmer: Monthly Economic Notes – August 2019

Economic Overview

Is secular stagnation a possibility in the coming years?  It is about a persistent downturn that does not respond to easy money.  In 2013, the former US Treasury Secretary Larry Summers speculated that the real interest rate at which savers and borrowers would agree to exchange funds may have been falling for decades and even turned negative.  This complicated the task of central banks, who could not push interest rates too far below zero without destroying banks’ profitability and fanning asset bubbles.  However, without meaningful inflation, real rates under secular stagnation would, even with zero or slightly negative nominal rates, stay higher than what borrowers could afford, stifling productive investment.  Without aggressive fiscal policy, the economy could remain stuck in a low-rate, slow-growth rut.

Monthly-Notes-August-2019.pdf