Low Interest Rates May Be the New Normal
Mother Jones
<!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.0 Transitional//EN” “http://www.w3.org/TR/REC-html40/loose.dtd”>
Paul Krugman says that low interest rates are likely to be with us for a long time:
Structural change is happening fast — just not the kind of structural change people like to talk about. Never mind the stuff about skill mismatches and all that. What’s really happening fast is the demographic transition i.e., an aging population, with Europe very quickly turning Japanese. And the US, although growing faster, also turning down sharply.
Add to this the fact that what we thought was normal actually depended on ever-growing household debt, and it becomes clear that historical expectations about normal interest rates are likely to be way off. You don’t have to believe in secular stagnation (although you should take it very seriously) to accept that low rates are very likely the new normal.
If this is true, is it another reason to think that Thomas Piketty might be wrong about returns to capital staying high over the next century even as economic growth slows down?
View post:
