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Secular Stagnation? A Simple Chart


Whether the economy is experiencing “secular stagnation” — which can be roughly defined as a situation in which negative real interest rates are required in order to have investment demand soak up total savings with full employment — has been much debated recently by economists and policy analysts. This is important. If we’re in a period of secular stagnation, then we’re in trouble — it will be hard for everyone who wants a good job to have one, and we can expect a lot of asset bubbles and the consequent havoc.

Torsten Slok of Deutsche Bank Research just put together a very simple chart that has quite a bit to say on the subject. The similarity of private-sector GDP growth across the two recent expansions casts doubt on the secular-stagnation hypothesis (but doesn’t settle the debate, of course). I was surprised and illuminated by Dr. Slok’s chart.

If you’re interested, VoxEU has a new ebook on the subject. I will read it, but haven’t yet. You can find it here.

— Michael R. Strain is a resident scholar and economist at the American Enterprise Institute. You can write to him on Twitter at