Saving, Investment, And Secular Stagnation

May 19, 2021 10:40 AM ETSPY, QQQ, DIA, SH, IWM, TZA, SSO, TNA, VOO, SDS, IVV, SPXU, TQQQ, UPRO, PSQ, SPXL, UWM, RSP, SPXS, SQQQ, QID, DOG, QLD, DXD, UDOW, SDOW, VFINX, URTY, EPS, TWM, SCHX, VV, RWM, DDM, SRTY, VTWO, QQEW, QQQE, FEX, SPLX, EEH, EQL, QQXT, SPUU, IWL, SYE, SPXE, UDPIX, JHML, OTPIX, RYARX, SPXN, HUSV, RYRSX, SPDN, SPXT, SPXV16 Comments
Scott Sumner profile picture
Scott Sumner
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Summary

  • The zero lower bound on interest rates can create problems for nominal growth (i.e. monetary policy), but only if the Fed allows it to do so.
  • Secular stagnation is a long-run problem and hence is not caused by monetary policy, saving/investment imbalances, or the zero-bound problem.
  • Talk of saving/investment imbalances is not useful; it’s an extremely convoluted and misleading way of thinking about monetary policy failures.

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Tyler Cowen asks a few questions regarding the relationship between saving and secular stagnation:

I have never understood how savings is supposed to remain above investment for extended periods of time. . . .

This article was written by

Scott Sumner profile picture
1.1K Followers
Bio My name is Scott Sumner and I have taught economics at Bentley University for the past 27 years. I earned a BA in economics at Wisconsin and a PhD at Chicago. My research has been in the field of monetary economics, particularly the role of the gold standard in the Great Depression. I had just begun research on the relationship between cultural values and neoliberal reforms, when I got pulled back into monetary economics by the current crisis.

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