Such economic success as the industrial world has enjoyed in recent decades has reflected a combination of very low real rates, big budget deficits, private leveraging up and asset bubbles.Don't you want to determine why this is so?
No one from whom I have heard doubts the key conclusion that a combination of meaningfully positive real interest rates and balanced budgets would likely be a prescription for sustained recession if not depression in the industrial world.
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Summers:
Sandbu argues against the notion of secular stagnation in part because he thinks it may lead in unconstructive directions like protectionism...If what Summers says is correct, Sandbu rejects the idea of secular stagnation because he doesn't like where it may lead.
Do you see how wrong that is? To understand the economy you evaluate ideas based on how they fit reality. You don't reject ideas because you think they may lead someplace you don't want to go. Understanding the economy is not like planning a vacation.
To make matters worse, Summers does not address this issue.
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Couple things Summers says. One, in regard to making interest rates even more negative: "capital cost is already not the barrier to investment". An excellent observation.
Two: "I have trouble thinking about behavior in situations where people and firms are paid to borrow!" Yeah.
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Summers: "we are accustomed to thinking in terms of debt levels". But he's not talking about debt. He's talking about government debt.
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