Does the Egertsson and Mehrotra model of secular stagnation work?

Their new paper is here, ungated here (pdf), here is the key passage:

We have shown that in the model with capital, the presence of productive assets carrying a positive marginal product does not eliminate the possibility of a secular stagnation. The key assumption is that capital has a strictly positive rate of depreciation. In the absence of depreciation, capital can serve as a perfect storage technology which places a zero bound on the real interest rate. It is straightforward to introduce other type of assets, such as land used for production, and maintain a secular stagnation equilibrium. For these extensions, however, it is important to ensure that the asset cannot operate as a perfect storage technology as this may put a zero bound on the real interest rate.

Let me recapitulate the basic problem.  Secular stagnation models are supposed to exhibit persistent negative real rates of return, but how is this compatible with economic growth and positive investment?  Just hold onto stuff if need be and of course the goverment can help you do this with safe assets, if need be.  The earlier models had no capital, which ruled out this possibility.  The new model assumes storage costs for capital are fairly high, or alternatively the depreciation rate for capital is high.  Since you can’t sit on your wealth, you might as well invest it at negative real rates of return.

But at the margin, storage costs for goods (and some capital) are not that high.  My cupboard is full of beans and cumin seed, but I eat the stuff only slowly.  In the meantime it is hardly a burden, nor is it risky since I know it will be tasty once I make the right brew.  Art has negative storage costs (for the marginal buyer it is fun to look at), although its risk admittedly makes this a more complicated example.  Advances in logistics, and the success of Amazon, show that storage costs are getting lower all the time.

Secular stagnation might be a good model for Liberia and Venezuela and Mad Max, but not for the United States today or other growing economies with forward momentum.  But a credible stagnation model for America needs to recognize that rates of return will be lower than usual but not negative in real terms.  And there won’t be a long-run shortfall of demand because eventually market prices will adjust so that demand meets the supply we have.  That is a supply-side stagnation model of the sort promoted by myself, Robert Gordon, Peter Thiel, Michael Mandel, and others.  In the secular stagnation model as it is now being discussed by Keynesian macroeconomists, you end up twisting yourself in knots to force that real rate of return into permanently negative territory.  Of course if you allow the real rate of return to be positive albeit low, the economy is not stuck in a perpetual liquidity trap as people move out of cash into investment assets.  The demand-side stagnation mechanisms fade away into irrelevance once prices have some time to adjust.

Izabella Kaminska comments here.  Josh Hendrickson has a very good blog post on the model here.  I’ve already cited Stephen Williamson here, he notes the model is really about a credit friction and would be remedied with a greater supply of safe assets for savings, an easy enough problem to solve, for instance try the Bush tax cuts.  Here is Ryan Decker on the model, and here is Ryan arguing that investment is aggregate demand also and many of us seem to have forgotten that, a very good post.

This is an important and interesting paper, but only because it shows the model doesn’t really hold and requires such contortions.  The discussion of policy results is premature and way off the mark.  The authors should have included sentences like “storage costs aren’t very high, and the economy as a whole does not exhibit negative real rates of return, so these policy conclusions are not actual recommendations.”


safe assets having a negative real rate doesn't prevent risky assets from having a positive real rate, so I am not sure how stylized facts on the economy as a whole are supposed to work here. Who performs maturity transformation on beans and cumin seed? I am sure that advances in logistics have eased the problem of coordinating maturities but I am not sure the problem is close to solved.

We already have all the stuff we want. We mainly just want to get rid of our neighbors. They cramp our style. Save to buy their land? Or save to move? I'm short oil. The supercycle shows all signs of a super down move.

As far as I can tell, TC is the best economist around at articulating his views in an objective, engaging manner. But I think he neglects the energy markets. The key here is whether oil has entered a new secular decline and, if so, what that means.

I remember that oil needs to be around 70-80 USD per barrel to make fracking profitable. If oil goes below that price, suddenly local US production will go down sending price up again. The only problem is that oil production is not as flexible as prices. Reducing production is easy, increasing it takes months or years.

'Remembering' may not be the best approach... every shale well is different, and the technology is improving over time, driving the breakeven oil price for new drilling lower for the marginal well.

Question/observation from a non-specialist:

Seems to me that you can get some strange and surprising results by using these life-cycle, overlapping generations (OLG) types of models. Another example is this new paper on high optimal marginal tax rates by Kindermann and Krueger.

These OLG models are interesting and yield some insights, but I'm just not sure to what degree the intuition you get from an OLG model transfers over to a dynastic model, or (more importantly) which insights might transfer to a more realistic model that has elements of both. Are there pitfalls of taking OLG models too seriously? (I'm aware of some pitfalls of taking dynastic models too seriously, like here: )

I note that Piketty is all about dynasties, and I don't see how his ideas would even make any sense at all in an OLG framework. But I doubt than any of the pundits will notice this when it's time to voxsplain the new research to us.

'The discussion of policy results is premature' and the approvingly cited 'he notes the model is really about a credit friction and would be remedied with a greater supply of safe assets for savings, an easy enough problem to solve, for instance try the Bush tax cuts' obviously have nothing to do with each other, just being another one of those thoughtless coincidences one encounters when discussing matter economic at a GMU econ professor's web site.

In your beans and cumin example, once you have all the beans and cumin you could possibly eat stored away, any further beans or cumin have no value to you and cease to be a low storage cost store of value. At that point the storage and spoilage costs, no matter how low, give it a negative real rate of return. Good stores of value may be finite.

This is an attempted model of global stagnation. It can't be applied on a national level as it disallows cross-border trade and investment.

Hahah Well I'm sure Larry Summers will be discussing Secular Stagnation on his wife's new MOOC about fiction.

Of course, owners of capital won't accept low rates of return on "safe assets"; instead, they will take on greater risk through more speculative investments. In turn, those speculative investments will eventually prove to be just that: speculative. The bubble will burst, a financial crisis will ensue, and the government and Fed will implement rinse and repeat. Secular stagnation is a misnomer: there's nothing stagnant about a financial crisis. The assumption is that the government and Fed will always implement rinse and repeat, but how many times will that be politically feasible. I don't know the answer, but it's not infinite.

Moore's law notwithstanding, there really does not seem to be really compelling reasons to upgrade computers these days. Unlike earlier eras, computing power is not exactly surging forward. Existing computing infrastructure is often perfectly fine with the new (if any of it is new) software apps coming down the line.

Seeing as how robust computing is as a capital good (it can last for decades, many times), I can see it being a store of value and lead to secular stagnation.

The investments Ryan writes about are of course not financial investments but fixed investments, it's not entirely clear to me that he understands this. And the secular stagnation problem with these investments is of course that, in the western world, these have been tending downwards during the 30, 40 years. Initially, the gap was fiulled with government consumption (everywhere), household consumption (USA) or exports (Switzerland, Germany, Netherlands). These strategies may have run their course, surely when we continue to slash wages and incomes. Some data on the investment decline:

This comment is incredibly stupid and demonstrates a near complete misunderstanding of macroeconomics.

In "National Income and the Price Level," Martin Bailey discussed the issues of the liquidity trap and secular stagnation.

He observed that at a zero real interest rate, it would be profitable to level the Rocky Mountains and fill in the Gulf of Mexico. The land created would have a rate of return over zero. Also, replacing all steel with stainless steel would pay off.

The examples get to the problem. If someone wanted to level a mountain and fill in the Gulf, it would take a decade to get EPA approval, if it ever came. At negative real interest rates, there are plenty of profitable investments. Maybe in the medical sector, or energy, or finance, or banking, or education, or transportation....where government approval can block the investment for a decade. Secular stagnation is feasible in a world of heavy regulations and taxes, regardless of technological opportunities or the productivity of capital. Keystone Pipeline, anyone?

In a regulated state, easy Fed policy might boost the stock market and lower bond yields without boosting investment much at all. Sound familiar?

"Advances in logistics, and the success of Amazon, show that storage costs are getting lower all the time"

This doesn't seem right to me. Advances in logistics mean that storage is less and less necessary, since retailers are getting better at predicting demand and quickly delivering products to consumers. That's different from saying goods are getting closer to being a perfect store of value. What percentage of modern goods (and capital) take the form of high-tech machinery and electronics? Is there anything that loses value more quickly? What am I missing?

"In the absence of depreciation, capital can serve as a perfect storage technology which places a zero bound on the real interest rate."

And in the absence of gravity, space travel would require far less energy.

If we could see the ideal (in Plato's Cave) there would be no need for the difficult work of interpreting those pesky shadows.

In a world with negative real interest rates, non-depreciating capital could be attractive. If only there were such a thing, in this non-ideal world.

The main storage technology in use these days is housing. Adair Turner frequently points out that life-cycle saving is done largely via home loans now. He and others note that these loans have become the main part of bank portfolios. In order to understand storage costs, should we not focus on the performance of investments in housing? My understanding of housing bubbles worldwide is that people are trying to use more storage capacity than exists, and society occasionally realizes this, which leads to a correction in home prices.

Some would argue that we rely more on housing than on business loans for storage due to the low risk weights assigned to home loans in bank capital regulations. This argument is developed in detail by Julien Noziet at

Art, beans, and land would not be risk free non-depreciating assets. Art could lose its value if it goes out of style or new artists appear. Any given piece of land could see its value change.

Once you're done carb-loading your tray, the counter will wrap everything in individual plastic sheets.
Is the first question that pops into mind
& out of my mouth. If both cars were side by side no doubt
more times than most you will pick the red car but the blue car is still on your list.

If you wish for to take a good deal from this paragraph then you have to apply such
strategies to your won website.

It is not my first time to pay a visit this web page, i am visiting this website
dailly and take pleasant information from here everyday.

This is the reason I suggest you take the recommended daily intake for Protein because this will keep you consistent as opposed to
fluctuating from high to low daily intakes. Add one-half teaspoon of salt, one-half of teaspoon of
turmeric, and one-half teaspoon of garlic powder, and you might be ready to look.
Protein powder jillian michaels You are the one, which will need to
consume a plan, that can accomplish what you
need, so find a diet and protein powder that can fit what you
want to accomplish.

But you're not restricted to beef alone, because buffalo and venison are also excellent various high protein red meats.
There a wide range of varied uses of benzocaine powder as
in comparison to former one.

19.2 v cordless craftsman drill reviews

Hi there Dear, are you really visiting this web page daily, if so after that you will definitely get nice knowledge.

top 5 gaming laptops for under $1,000

They also can be found in many colors, from bridal white to vibrants reds and yellows,
every one of the way to deep purples and black, which means they're able
to coordinate well with any wedding theme. You can add in a few all purpose fertilizer
at half strength each and every time you water. The flowers are perched on tall sturdy stems that exceed glossy deep green leaves shaped like pointed sails.

Also called Bugle Lilies, these flowers will naturalize within your Houston, Texas garden.
It isn't cheap, nonetheless it isn't extremely expensive either,
in addition to their perfect for year round.

Wow, that's what I was searching for, what a information! existing here at this blog,
thanks admin of this website.

What's up, just wanted to say, I loved this blog
post. It was practical. Keep on posting!

Hi, its plessant article about media print, we alll be familiar with media is a enormous
source of facts.

Hiya very nice web site!! Guy .. Excellent .. Superb ..
I'll bookmark your blog and take the feeds additionally? I am happy to seek out a lot
of helpful information right here within the publish, we need work
out extra techniques on this regard, thank you for sharing.
. . . . .

The beauty and color of chakra crystals makes them a pleasure to use.
The Root Chakra deals with fear and survival and is situated on the base of the backbone.

In the 12 months ending July 2014, JFK received nearly half of travelers
from the three West African nations. decades prematurely because data about it
was gathered by way of DARPA's secret time travel program unlocks a
number of of the more enigmatic info within the Would love a travel ban (outgoing only) so
that income can not presumably escape.

The versatility of a maxi skirt cannot be underestimated.

My brother recommended I might lime this web site. He was totally right.
Thiis put up truly made my day. You can not imagine just how much timje I had spent for this info!
Thank you!

I like the valuable info you provide for your articles. I'll bookmark your blog and take a look at again right
here regularly. I am relatively certain I
will learn many new stuff proper right here! Best of
luck for the next!

Hi it's me, I am also visiting this site daily, this website is really pleasant and the users are truly sharing nice thoughts.

Figure 2: Outer diameter comparison of your passive
and active cable - Figure 1: Traditional passive HDMI (left) and active HDMI cable (right).

And should your TV won't accept whatever else, it's time to upgrade..
Rca to hdmi converter cable Figure 2: Outer diameter comparison of your passive and active cable - Figure 1:
Traditional passive HDMI (left) and active HDMI cable (right).

And should your TV won't accept whatever else, it's time to

A special cloth covers a tiny table, on which can be placed a kolach, a bread, with a lit candle; to
remind us that Christ is the "Bread of Life", as well as the "Light in the World".
Next for the problem well over watering, not enough light causes probably the most challenge towards the
residential orchid grower. X2 super power led grow lights Now return to your life,
remembering until this great light is definitely with you.

This place is completely crawling with nightstalkers,
including one very strong one called Shadis. The sort of lighting you should utilize
for family photography significantly depends on the setting
you select.

悔しかったら、収入あげるんだな、バカは低賃金、これは事実 桃栗さん(女性 37歳 O型 東京都)2014年05月21日(水) 12時12分
訪問者、表示されてなかったはずの人が表示されてたもんなぁ。 そういうのって葬式みたいな突然の出来事やったら分かるけど 結婚指輪 ランキング ブランド

金と心に余裕のある友達を多数持ってれば、多くの場合で道を踏み外さずに済むとは思う 桃栗「exciteが私にしたことが正しいのかどうかを、それなりの機関に報告し」 友達 結婚祝い
ネットウォッチにでもスレたててやってよ タバコは絶対に嫌なんですよと返事しようかと思ったけど

Not surprisingly, these compounds often include biotin,
as it is widely recognized, that there is often a correlation between thinning which vitamin. There is much more that will be learned about
thinning hair in San Diego and a helpful resource regarding thinning hair can be found at.
Biotin carboxylase Your lifestyle leaves a great effect on your skin, eyes and hair as well.

There really are a many hair products specially formulated
for children's hair plus more are arriving each day.

and vitamins and when there are deficits, hair can suffer even more.

Now, the rate of the Wireless Home Security Cameras is also achieveable for that common consumer, and you could flourishingly replace the pricey and annoying alarm.
GFI LANguard offers some of the finest network security software making use of their Network Security
Scanner. Security cameras, which use a color display will
probably be costlier compared to the cameras with a monochrome display.

These cameras contain the convenience of not having to get hardwired in a system and the wall.
An encrypted transmission renders the wireless home security camera systems virtually
impossible to invade.

The place you start out the disco light research usually
depends on what kind of disco lights you happen to be seeking.

Give yourself room to develop, try not to make the mistake of getting a camera with all the bells and whistles within the
hopes of 'learning how to make use of it later.
Led grow lights 2014 LEDs include so many benefits that they're considered the top
green lighting source of the century.

Otherwise, it is possible to have problems whenever less exterior lights is available, and in addition specifically inside
the winter. Eighty is really a very good rating and gives an indication from the quality of light made
by MH bulbs.

These trials really are a way in your case to experience the overall
game, learn in case you like it and assess if it is
really worth the investment. Another facet in the u - Vme set up that impressed me is the
high degree of customer and associate support they have planned.
Ibuypower newegg Again, most or all gaming keyboards offer 500Hz
or 1000Hz polling rates, meaning improved responsiveness.

Poor range of format that is certainly supported will render your custom songs useless.

With this method you can achieve an easy and cost-effective gaming computer suited to your own gaming needs.

You can know many ways and ideas to create maps for
Minecraft server easily. Creating a Nether Portal in Minecraft
allows the ball player to enter the Nether. Try minecraft free online

You can know many ways and ideas to create maps for Minecraft server
easily. Creating a Nether Portal in Minecraft allows the ball player to enter the Nether.


At the moment it's thought that around 37,000 people
within the UK make v3 weight loss pill, Acomplia.
Proactol assists those on a v3 diet to bind and have rid around 27.
Voyager pill side effects

They create a better tone for professionals, who're more picky about
these items than amateurs. Essential efas, Omega 3, 6 and
9, assistance to slow the results of aging.

Having such proof makes giving this berry a go as
part of your daily regimen. Recall that: Plants use
fractional co2 (CO2) that they can "breathe in" to create sugars
(plant food).

堀北真希 CM こうやって話題を振りまいていかないと続かないんだよ。
*317,828 124,473  AKB48 桜の栞
関東連合 Office48 バルビゾンビル 朝青龍事件 海老蔵事件 暴力団との写真

Regarding the thought alone, the developers did a fantastic job of differentiating Robo Smasher from some other game on the market.

You may also refer towards the various sites depending on how to select a perfect gaming mouse, then get yourself a
brief knowledge of every mouse. Gaming mouse and keyboard amazon You are getting
that which you paid for, but until you specifically desire a super-precise mouse, some of the Lachesis's features might
be overkill.

Budget is a real problem, particularly for gamers who have
to spend their own money. Regarding the concept alone, the developers did an excellent job of differentiating Robo
Smasher from any other game out there.

It impoverished Venezuela for decades only benefitting Venezuelan ultra elites aligned with Washington. He asked God
three times to remove a thorn that was in his side, and God never did remove the thorn. Texting lingo for old people

The director will make all the creative choices about the film,
but will not do the budgeting because this would interfere with the work
of the line producer. Other factors can make one more or less susceptible to
toxins, like age, where you live, whether or not
you smoke, even where you work.

But keep in mind that if you eliminate gluten from
your diet, steer clear of refined sugars and eat plenty of fresh, green vegetables,
you can make a startling recovery. Characters can be found throughout EPCOT and each character will sign his or her autograph happily.
Best gluten free recipes


They have a set of Easter flowers and plants which can be safe for
pets as well as a set of toxic flowers. Some plants might be
best removed, but that may well not be necessary in every cases.
Red roses are popular of course, though the calla lily is quite beautiful
and also comes in shades that fit in with all the color schemes selected when scouting for fall wedding flowers.

I was required to rinse each of the dirt off the roots, and plant
it in some of that special soil for water plants when I got home.
They is going to be capable to view a bouquet of Calla Lilies about the left hand side with the wedding invitation words printed or written inside.

Drain sink, rinse them well with clear water, then lay
your rollers out on a towel. And through eyes,
we can somehow know about the opposite person like the feeling, characteristics
or even intentions. Fingering

Hi Dear, are you truly visiting this website on a regular basis, if so afterward you
will absolutely get fastidious experience.

It comes with an incredible graphical user interface, and is also quite fast in comparison to other mobile browsers, since it supports data
compression. Kayak It didn't impact the booster, and was much easier to eject
when the capsule was on orbital insertion mode.

Leslie screams even though Paul didn’t pull her pigtail, and
Paul gets sent home early for the kindergarten bus. Several 4 star hotels can be found for under
$100 per night in major U.

Comments for this post are closed