OP-ED COLUMNIST
A Permanent Slump?
By PAUL KRUGMAN
Published: November 17, 2013
Spend any time around monetary officials and one word youâll hear a lot is ânormalization.â Most though not all such officials accept that now is no time to be tightfisted, that for the time being credit must be easy and interest rates low. Still, the men in dark suits look forward eagerly to the day when they can go back to their usual job, snatching away the punch bowl whenever the party gets going.
But what if the world weâve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
You might imagine that speculations along these lines are the province of a radical fringe. And they are indeed radical; but fringe, not so much. A number of economists have been flirting with such thoughts for a while. And now theyâve moved into the mainstream. In fact, the case for âsecular stagnationâ â a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between â was made forcefully recently at the most ultrarespectable of venues, the I.M.F.âs big annual research conference.
Again, the evidence suggests that we have become an economy whose normal state is one of mild depression, whose brief episodes of prosperity occur only thanks to bubbles and unsustainable borrowing.
Why does all of this matter? One answer is that central bankers need to stop talking about âexit strategies.â Easy money should, and probably will, be with us for a very long time.
http://www.nytimes.com/2013/11/18/opinion/krugman-a-permanent-slump.html
Krugman argues for permanent easy money policy.
A Permanent Slump?
By PAUL KRUGMAN
Published: November 17, 2013
Spend any time around monetary officials and one word youâll hear a lot is ânormalization.â Most though not all such officials accept that now is no time to be tightfisted, that for the time being credit must be easy and interest rates low. Still, the men in dark suits look forward eagerly to the day when they can go back to their usual job, snatching away the punch bowl whenever the party gets going.
But what if the world weâve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
You might imagine that speculations along these lines are the province of a radical fringe. And they are indeed radical; but fringe, not so much. A number of economists have been flirting with such thoughts for a while. And now theyâve moved into the mainstream. In fact, the case for âsecular stagnationâ â a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between â was made forcefully recently at the most ultrarespectable of venues, the I.M.F.âs big annual research conference.
Again, the evidence suggests that we have become an economy whose normal state is one of mild depression, whose brief episodes of prosperity occur only thanks to bubbles and unsustainable borrowing.
Why does all of this matter? One answer is that central bankers need to stop talking about âexit strategies.â Easy money should, and probably will, be with us for a very long time.
http://www.nytimes.com/2013/11/18/opinion/krugman-a-permanent-slump.html
Krugman argues for permanent easy money policy.
