Das Problem mit der säkularen Stagnation

Apr 19, 2015 Arvind Subramanian

DELHI – In einer aktuellen Diskussion über die Plausibilität der säkularen Stagnation zwischen Ben Bernanke, dem ehemaligen Vorsitzenden der US-Federal Reserve, und Larry Summers, dem ehemaligen US-Finanzminister, stimmten beide über die Notwendigkeit einer globalen Perspektive überein. Aus dieser Perspektive allerdings widerspricht die Hypothese einer säkularen Stagnation in der Zeit vor der weltweiten Finanzkrise von 2008 einer entscheidenden Tatsache: Das weltweite Wachstum betrug damals durchschnittlich über 4% – der höchste jemals gemessene Wert.

Dasselbe Problem trifft auf Bernankes Hypothese zu, langsames Wachstum spiegele eine „weltweite Ersparnisschwemme“ wider. Aus einer keynesianischen Perspektive kann der Aktivitätsschub der frühen 2000er Jahre nicht durch eine Steigerung der Ersparnisse erklärt werden.

Die Unterstützer der Hypothese der säkularen Stagnation kümmern sich anscheinend um das falsche Problem. Aus einer wirklich säkularen und globalen Perspektive betrachtet liegt die Schwierigkeit in dem Versuch, den Boom vor der Krise zu erklären. Präziser ausgedrückt liegt sie in der Erklärung des Zusammentreffens dreier großer globaler Entwicklungen: einer Zunahme des Wachstums (und nicht der Stagnation), einem Abschwächen der Inflation und einem Rückgang der realen (inflationsbereinigten) Zinssätze. Jede überzeugende Erklärung dieser drei Entwicklungen sollte sich nicht so sehr im Rahmen der reinen Gesamtnachfrage bewegen, sondern den Aufstieg der Schwellenländer, insbesondere Chinas, stärker in den Blickpunkt rücken.

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0 Comments on this paragraph, 21 in all 21 Comments on this article

Bruce Steinback Sep 15, 2015

Interesting article, but I have one serious problem with it. You admit in the article that China's growth was pretty much entirely self-funded, and indeed the mercantile nature of it tended to add money to the 'global investment glut' rather than absorb it. Therefore, that 'elephant in the room' would need to be removed from the global growth calculations for purposes of debating secular stagnation.

For most other developing countries, you have a point that they should be included in to 'secular stagnation' calculations, but I wonder if they provided an investing opportunity sufficient to counterbalance the apparent shortfall in the developed world. Thoughts?
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Rob Maris Sep 1, 2015

"From a Keynesian perspective, an increase in savings cannot explain the surge in activity that the world witnessed in the early 2000s."

Of course it can!
As long as savings are increasing, this means that loans are increasing as well, simply because loans make savings. And these loans guarantee growth.

It's the debt ceiling - so perceivedby numerous agents - that causes the current problems, because it stops debt creation and lending, hence affecting demand.

As long as the huge amount of savers and especially the "huge" savers don't spend their savings, nothing will change. In "A Tale of Two Theories" Jean Pisani-Ferry says "vicious circle", related to both theories. That's right. But the only road to an escape isn't mentioned: savers who spend. Keynes already accounted for this.
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Rajeev Upadhyay Apr 29, 2015

I do agree that it is time to have global prospective to find solutions that today's global economy is facing. But questions remain unanswered until and unless there is really truthful answers to these questions. Any one-sided answer would not work but reality is that nations would take care of their own respective economies even if it goes on hurting others. So it is time for secular economic scenarios.
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captainjohann Samuhanand Apr 24, 2015

Why Stagnation is called " Secular"? Asians like Chinese and Indians will save because they have known invasions, natural calamities etc . But Chinese are now splurging their wealth judicially in Africa and Pakistan and Sri Lanka. their Infrastructure bank is taking off with EU nations joining in Q. Now they think of railway tunnels under the Himalayas. But USA still thinks of exporting war and selling weapons which is its principal export. Americans live for present while the Asians tend to be like ants saving for the rainy day.
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Hugo Penteado Apr 23, 2015

What the hell have you economists in mind when you think about growth or stagnation? Are you going to keep the blind idea that the planet is only there to be fully explored, that all natural spots has to be covered with a toxic agriculture, mining, construction, cars, houses, electronics, trash, pollution, etc. without any side effect or setback? The end of water in many places, including California, is not a proof of the fatal error of the traditional economics? Water is a finite resource. Economists believe in these two conclusions: (1) economic process is neutral to Nature and (2) Nature is inexhaustible. To answer, we have to go back to the birth of Economics as a science (science???) to see how the pioneers used mechanical laws to explain all the economic processes. By these mechanical laws, economic process is considered neutral to Nature and they are considered totally reversible and predictable. Besides that, some pundits created the false idea that man produced capital is a perfect or quasi perfect substitute for Nature (if we try to replace Amazon water production by human capital, we will need 60.000 Itaipus – a huge Brazilian hydroelectrical usin).
By this huge flaw, we have incredible distortions of the reality: (1) there is no exchange of matter and energy between the economic system and Nature; (2) there is no qualitative changes in the natural ecosystems; (3) the cost of destroying Nature is zero (this is the only way to keep profits growing and flowing to a few hands); (4) in all economic fields are assumed the myth of total separation between Nature and the economic system, without changing any theoretical conclusion; (5) our planet is the subsystem of the economy, so the economy can be bigger than the planet, (6) if some environmental are surging like pollution, climate change, contamination, this can be solved by particular policies studied in the Environmental Economics, another myth (note that social problems like end of employment, huge wealth concentration mainly indeveloped nations, are completely ignored…).
In reality, the economic system is a planet subsystem, and as the small part, we should follow the planet rules and laws to be sustainable but what we got is a wholly unsustainable economic system. If economic theory is not revised and corrected, and the idea of economic growth in a finite place like Earth is not considered a huge mistake, we are going to face our own extinction. Life extinction is already underway, the biggest in 65 millions of years and maybe the fastest in the history of this planet. That extinction is endogenous, caused by just one animal, that is, humankind. It is by far ingenuous to believe this extinction will not be against the provokers.
We have to stop shining the boots of corporate interests and start immediately a research with known technologies to find ways to balance our demands with planet deteriorating conditions. This means that we have first and immediately to halt both population and material growth.
- Amogh Arakali Apr 24, 2015
  
  Dear Hugo, I am afraid you're as susceptible to stereotypes as many economists are susceptible to the grandeur of their own illusions. While it is true that dominant discourses in economics have terrible records of ignoring or underplaying real-world issues such as environmental degradation, it's a fallacy to assume that economists do not engage with these issues at all.
  
  Take your statement "Economists believe that the economic process is neutral to nature" I work as an economist in India where the the impact of monsoon rains upon food prices is a well-known, publicly discussed phenomenon and rainfall patterns are closely followed by economists due to their significant consequences for food availability (there are however disagreements and acrimony on how to deal with shortfalls, ensure sustainability or distribution of produced food). Similarly, there are economists who work on ecosystem services, on energy production and consumption, resource conservation and equitable access. I myself often engage with issues of access to water in southern India, not unlike those in California (or Sao Paulo, if you want another example).
  
  As for your other statement that economists believe nature to be inexhaustible - well, yes and no. Most economists accept that there are always going to be shortages of something or the other in the immediate future but also believe that given enough time, a solution will be found to each shortage. Take water for example - water is, as you said, a finite resource but only in the immediate future. Given enough time, many will argue that aquifers regenerate, climate patterns change and more importantly, people find ways to deal with water shortages, either by increasing supply, cutting down their demand or in drastic situations, moving to better places. This does NOT mean that economists are okay with twiddling their thumbs and waiting for the long run, nor does it mean that they are okay with people abandoning their homes. It just means that a lot of economists tend to emphasise the difference between what's going happen in a few decades versus what's going to happen in the next few weeks, months or years. This can work both ways - one can either ignore the future and concentrate on the present or one can work on a range of short-term, medium-term and long-term solutions that can work together, even if they seem contradictory at first. There are economists who belong to both camps.
  
  Anyway, I guess what I am trying to say is that you're not entirely wrong and economists certainly need to be criticised and scrutinised more. However, I would request you to refrain from stereotyping an entire field as flawed or broken. It makes work for those who are concerned with the problems you've mentioned all that much harder.
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- Luca Grande Apr 24, 2015
  
  The current prevailing economic policies based on a debt inflated perpetual growth model are a real cancer on modern society. It leads to greed, inequality, violence, wars and destruction of the planet.
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- Luca Grande Apr 24, 2015
  
  Well said, Hugo!
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ramji yahoo mahadevan Apr 23, 2015

good article, lets see the outcome of the meet
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Per Kurowski Apr 23, 2015

“the global supply of loanable funds increased” much because of the incredible reduced equity requirements for banks; and which caused for instance European banks that had been leveraged about 10 to 1 to end up in over 45 to 1; though still reported as 10 to 1 because of the disguise provided by the trickery of risk weighing the assets.

http://teawithft.blogspot.com/2009/05/marginal-authorized-leverage-was-then.html
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Procyon Mukherjee Apr 22, 2015

Would be curious to know how the secular stagnation hypothesis leaves the equity markets out of its purview and all the gloom and doom is set aside for the economies of the world; is it that the discounting rate at which equity markets see an investment opportunity is vastly different from the rate at which the general economy discounts the future?
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John Brian Shannon Apr 20, 2015

Hi Arvind,

It's an interesting article although, respectfully, I disagree with one of the points contained within your conclusion.

"For the rest of the developing world, the real worry is not a shortfall of demand; it is the need to sustain high rates of productivity growth so that they can catch up with the advanced economies."

Productivity growth is a factor of developed economies -- much less so in developing economies, and not a factor at all in frontier economies.

Developed nations are so similar throughout their whole economy, that really, there are only a handful of ways that they compete with each other. One of those ways is the measure of productivity.

What frontier and developing economies need, is a growing overall economy.

Whatever the productivity stat is doing in developing nations is irrelevant because they are not yet competing with developing nations and the productivity stat wildly varies throughout their particular economy.

For no matter how well their productivity improves in small segments of the economy, the majority of the country is in no way competing with developed nations.

A growing economy, better money velocity, better goods-to-market emphasis/infrastructure spending, streamlined government policies, and bilateral or free trade agreements are the things that developing nations need to grow.

Productivity can hamper growth in frontier and developing nations as improvements in productivity reduce employment through efficiencies, thereby creating a very efficient company or sector -- but a larger pool of unemployed workers which is a big enough problem in developed nations, let alone developed nations where it can cause societal dissatisfaction, social unrest, and other negatives.

After decades of effort to get to the point where the whole national economy stabilizes to a generally uniform level (this usually happens when the service sector surpasses 50% of the total economy) the result is a developed nation.

That is the time when many variables have been standardized to developed nation levels, and only then does the measure of productivity matter in the competition for FDI, credit rating, ease-of-doing-business and other credit and investment markers.

I'm not saying that productivity isn't a worthy goal, I'm saying that it is a worthy goal once an economy reaches developed nation status.

Best regards, JBS
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Jose araujo Apr 20, 2015

Secular Stagnation only makes sense in a Supply Side perspective, once you ditch Supply Side theories, Secular stagnation makes no sense.

So the question is, do you dicth a lifes work or make up a new absurd" explanation.

Most of the supply side economists preferr to make up a reality then to face the facts, thats why they are resembling more and more like a cult.
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Jonathan Lam Apr 19, 2015

Gamesmith94134: The Problem With Secular Stagnation
Many may identified the wrong problem for secular-stagnation hypothesis, but more would agree on the inequality that caused secular stagnation, and aggregate-demand framework ended the perpetual growth even for China and India. Especially, when real capital saved could also be depreciated by the real interest without inflation adjust, it reflected in the ten-year bond of 1.88% or 0.7% in euro bond. It may not be the same as Bernanke’s hypothesis that slow growth reflected a “global saving glut”; I think he may mislabel it on the saturated price on the assets and stock prices. If he put those credits or savings as commodity with no value added; since the secular growth came before consumption; he may see the margin of affordability and those practice of pricing was not consumed in the secular or population with no-growth.
Perhaps, we take an example in the real estate average sale price in $700,000 of San Francisco and its median earning of $80,000 who will pay about 40% of their income for their home. Are all San Franciscans are IT people or government workers like police and fireman? Of course not. The current home purchasers are corporate and foreigners, since there are few making $80,000 a year. The trend will go on as corporate and foreigners seek depreciation and monetary leverage on their depreciated currencies; the homeowner changed to renter principle that asset took away the revenue from the government and the middle class pays more; so is the cost for business; and the secular stagnation is inevitable and the equity is not consumed. It is because real estate turn into corporate assets and leverage for the currency exchange. Perhaps, This is how DoubleLine Capital’s Jeffrey Gundlach, the bond manager, said the full impact of the Federal Reserve’s “extreme policies” have yet to be felt in the market; and real estate is in a “dead spiral”.
And, I also believe the 9 trillion foreign loan and bonds is coming back to haunt us once the leverage turn negative once we raise the nominal interest rate at its minimum, or the rising cost of business will do its job as the leverage is no longer relevant even for M&A. Currently, the wave of layoff is beginning to roar, that balance sheet follow the outflow of cash will give American business a hard landing because of the low revenues from competitors from oversea; and low dividends from lesser investment off the currency leverage. Scarcity rules since Mr. Summer lost his bid in being the underwriter of all assets even from the oil glut. Some foreigners may think of pay off the loan or retrieve the bonds to set off the negativity but who is selling its assets worth $9 trillion to US on its dollar?
Perhaps, we should go back to the basic of economic in deeper search of sustainability that we live on the margin of affordability in balance with both the aggregated demand and diminishing return to implement growth. Perpetual growth may cause secular-stagnation since one may price it, and it must process through the margin of affordability; and it is the gate to other in consumption that adds value if only renewal is demanded; It is not just one paid in full means how much it is worth if such property or asset means to be publicly reckoned and consumed. Demand cannot be just priced without justification; after the margin of affordability that adds value to the process in the full cycle of consumption and demand. Otherwise, profit to return is undercut by saturation or over supply. Eventually, prices are fallen or currency is depreciated in its liquidity trap. Perhaps, we better understand now recession is not evitable without inflation or deflation because the ends of aggregated demand and diminishing return will meet and tested in the command of the margin of affordability.
And, I insist on 1% in tax or insurance in creating the FDIC on continental transfer because currency is a mechanism of transfer to price and it is just another commodity with no value added till consumed and demanded in its economical cycle and we develop in multi-polar speed and environment in dissolving the liquidity traps. After all, regardless how many policymakers would fantasize how they would globalize or standardize the trade; they must know the basic of economics that supply and demand. In addition, the margin of affordability is where they may put their foot in other’s shoe; it is better to fit. As in lubrication to growth, think of default and sovereign immunity; think three times by the margin of affordability and how aggregated demand and diminishing return are tested in booms and recessions.
“Don’t run. It is lubricated.”
May the Buddha bless you?
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Zsolt Hermann Apr 19, 2015

I am sorry for the parallel but this argument about "what to call" what is happening to world economy, and what the difference is in between leading and emerging economies is similar when politicians argue if they can call mass murdering people "genocide" or not. The fact that a large mass of people died will not change by what name we use for it.

Here too the problem is not in the details, it is not in specific processes. The problem is the whole paradigm world economy operates in, the way we live our lives.
At present each and every person and nation lives and acts as a cancer cell. We all try to grab anything we can for ourselves based on excessive, unnatural demand. We compete with each other in a ruthless, exploitative way and we succeed at the expense of the other.

So our present "policy discussions" resemble two cancer cells discussing whether they should slow down, or redirect their destructive activities. It does not matter since at the end of the day they will destroy the system and themselves nevertheless.

We evolved from and still exist in a closed and finite natural system. This natural system is very finely balanced in order to keep its general balance and homeostasis that is crucial for sustaining life and development.

The global and fully integrated human society has no choice if it wants to survive and continue evolving: we have to return to a natural necessity and available resources based lifestyle and mutually complementing collaboration as every other part, element of the natural system.
- Michael Public Apr 20, 2015
  
  Agreed, its semantics. The Titanic is taking on water and the captain and mate are arguing about whether it was caused by the iceberg being to strong or the ship being to weak.
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- Edward Ponderer Apr 20, 2015
  
  Funny, just an hour ago I had a somewhat related discussion with my wife. She complained that my answers to questions tend to be too detailed, and that the more important some one is, the more they must manage, the less detail they want.
  
  Yes--but its not that they need less detail, its that they can't handle more without surrendering control to something larger. So instead of "details," they take in sound bytes and use grossly simplistic models because it suits not the problem, but the limits of their grasp.
  
  If you perform open heart or brain surgery (save an old-style lobotomy) with a hammer and chisel, is there any question that the patient is going to die?
  
  No--it will only be the natural flow through the whole system that will provide scalpel and precise and whole procedure. The whole of us must act in balance--and the system beyond us will "know" what to do. It is the brain that must act--it is for the brain cells only to make the proper mutual connections.
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Praveen Swaminathan Apr 19, 2015

Why is growth decelerating today? Economists, like yourself, are suggesting austerity measures, tax concessions to the super-rich and corporations... What is required is an alternative to this austerity madness..... No more export lead growth for India or for most of the countries... It has to be consumption based on internal demand alone. China seems to have realized this and moving likewise.. Hopefully,Washington based economists like you also realize this..
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Paul Daley Apr 19, 2015

Good article. But if mercantilistic growth strategies are responsible for currency wars and asset bubbles elsewhere then it might be time to better organize and better regulate global capital flows, starting with better record-keeping on stocks and flows and the development of controls on predatory behavior. Piketty has recommended financial registers in all countries to keep track of all financial assets as we now keep track of real assets; the IMF should have an interest in promoting such registers. Similarly the WTO should have a role to play in defining predatory behavior in regard to the trade in capital assets.
- Barry McHugh May 1, 2015
  
  An Australian article in its Macrobusiness online newspaper posed this yesterday, which I understand you will find interesting:
  "... That’s why this chart on the correlation between the Australian Government-US Treasury spread and the price of iron ore is so startling." Find at paid content as follows (http://www.macrobusiness.com.au/2015/04/australia-iron-ore-hedge-fund/), and I can't provide it free. I pose this question, "If offshore derivatives market is $300 trillion as against $90 trillion in real world economy", can risks AND REWARDS be being siphoned offshore from India/Australia, shrinking their economies to levels below that which they otherwise would be. I would hope that anyone writing on savings glut would answer that. Good Luck.
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