The Secular Stagnation Hypothesis From The Bank of Italy
Fascinating overview of the secular stagnation hypothesis from the Bank of Italy (In English).
After reviewing recent long-run projections, we argue that similar warnings were issued in the past after all deep recessions.
Interestingly, pessimistic predictions turned out to be wrong neither because they were built on erroneous theories or data nor because they failed to predict new tech, but because they underestimated the potential of the technologies that already existed.
These findings suggest that today we should not make the same mistake and undervalue the effects of information technology.
This matches my personal belief: Much current economic commentary is the result of living through a 15 year down cycle, which will change.
Interestingly, our friend Larry Summers on CNBC today conceded secular stagnation may be more a Europe/Japan issue than a US issue. If the US economy is indeed at the front of a broad-based recovery, as it appears, it will be interesting to see where this issue lands.