The Secular Stagnation Reality Revisited
An economics professor who is not an economist. Imagine my exasperation at our conversation, complete with disdain on his part ? For he has no cares about the state of the markets from his theoretical perspective.
I was determined to stick through with it, nonetheless, for a free tutorial that kids pay money for and, of course, the whisky that came with it.
For what I did not glean or gleaned is not as important as the realisation that we are in the early stages of secular stagnation now, a subject close to my heart for the past 18 months since Larry Summers revived it back in late 2013, after he lost out on the Fed chairperson seat.
Premature, perhaps, to have jumped on the secular stagnation bandwagon without popular consensus and the general public indifference because all the public really cares about is recession or no-recession, really, or, as in the case of Venezuela, the rate and extent of hyperinflation.
Back in 2013, there was the possibility of stagflation, if we remember, with oil prices running at $100. The IMF was on a roll downgrading their growth forecast for global GDP from 4.1% to 3.3% which is what they did again recently.
At least, China was not a problem then.
The reality is starker today than it was in 2013. Imagine a world where the brightest spots for investment into 2016 becomes Nigeria, Burkina Faso and Ethiopia, with China falling to an uncertain 4th place (especially with their current brush with economic contraction) ? Nigeria with their annual GDP of US 568 bio, Burkina Faso and Ethiopia both negligibly unknown ?
Secular stagnation versus normal stagnation ? I cannot decide now.
“Secular” implies the depressed state of the economy is down to structural, supply-side factors, whereas “stagnation” suggests cyclical obstacles to demand are to blame. http://www.economist.com/blogs/freeexchange/2014/06/what-secular-stagnation-means-interest-rates
Larry Summers, 11 April 2014.
“There is increasing concern that we may be in an era of secular stagnation in which there is insufficient investment demand to absorb all the financial savings done by households and corporations, even with interest rates so low as to risk financial bubbles.” – http://larrysummers.com/secular-stagnation/#sthash.NXXhuaB6.dpuf
The global business cycle is fragmented as central banks and policy makers pursue their different agenda.