Krugman’s on fire with this post.
Echoing my German sun seeker point:
Assuring people that they can get a positive rate of return on safe assets means promising them something the market doesn’t want to deliver – it’s like farm price supports, except for rentiers.
Other worthwhile paragraphs:
So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? Summers’s answer is that we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.
He pins the causes of secular stagnation on demographics and/or a Robert Gordonesque decline in innovation.
I disagree with the Gordon view. As stressed on multiple occasions I believe if there was a stagnation in innovation in the last decade or so it was due to artificial scarcities and innovation suppression by cartels who have no interest in encouraging further abundance.
What’s more, I believe this period of stagnation is now over because innovation has found a way to breakthrough such suppressive barriers by becoming ever less monetised in nature. This has been facilitated by the open source and voluntary research sector — which has unleashed a global pack of nerds working on innovative solutions for the sake of fun and/or innovation’s sake, rather than for profit reason. It has also been facilitated by handful of innovation-minded corporates who don’t seem to care so much about meeting shareholder expectations for returns (Amazon, Elon Musk businesses etc).
The conditions are in place for the age of infinite equity and a new dotcom style bubble wealth effect — providing, of course, that access to that equity is distributed equally.