Maybe a different set of conclusions might be in order:
- The world economy today desperately wants to hold its wealth in claims on Global North sovereigns with exorbitant privilege issuing reserve currencies.
- A well-functioning economy creates things of value.
- The Global North sovereigns with exorbitant privilege issuing reserve currencies can create a lot of value. They should do so: governments should run up their debts until they satisfy demand with an equity return premium at a value we think is sensible and “normal”.
On “On Falling Neutral Real Rates, Fiscal Policy, and the Risk of Secular Stagnation
By: Bradford DeLong – Berkeley
[I]t is the weakening demand for investment goods (a side-effect of the tendency of GDP growth to decelerate) which may have been suppressing prices of investment goods. Rather than being a reason for secular stagnation, the weakening relative prices of investment goods may have been the ‘collateral victims’ of the secular stagnation. Of course, this makes the secular stagnation itself even more of an enigma – at least from the supply-side viewpoint
The Decline in Investment Shares Is Not Caused by Falling Relative Prices of Capital: A Note
Author: Leon Podkaminer
From: The Vienna Institute of International Economic Studies
There is no reason why there needs to be only one cause of low real rates so these factors may enter. But as I expect we will illustrate in the revised version of the paper, the largest part of the low frequency variation in ex ante real returns is accounted for by a downward trending factor common to all asset prices. This is illustrated for the US in the figure below. So risk premiums or factors specific to Treasuries are likely not high order.
Responding to some of the critiques of our paper on secular stagnation and fiscal policy
By: Larry Summers – Harvard University