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Secular Stagnation and Macroeconomic Policy
Mundell-Fleming LectureInternational Monetary Fund
November 3, 2016
Lawrence H. Summers
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Great Recession Very Damaging
Sources: Bureau of Economic Analysis, NBER, CBO, Census 2
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Triumph of Hope Over Experience
Sources: IMF, Federal Reserve 3
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Market Has Been Too Optimistic
Sources: Bloomberg 4
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Secular Stagnation
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Real Rates Have Fallen Steadily
Sources: Bloomberg November 2, 2016 6
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Along With Rates In The Rest Of World
Sources: Bloomberg, IMF 7
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Secular Stagnation Then and Now
Sources: Bloomberg, Philadelphia Fed Survey of Professional Forecasters Q4 2013, BEA, Federal Reserve 8
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Income Inequality and Secular Stagnation
Sources: IMF Working Paper 16/121 by Alichi, Kantenga and Sole “Income Polarization in the United States” 9
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Demography and Secular Stagnation
Sources: FEDS Discussion Series 2016-080 by Gagnon, Johannsen and Lopez-Salido “Understanding the New Normal” 10
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Leading Companies Require Less Investment
Sources: Bloomberg 11
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Capital Flows and Secular Stagnation
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Growth at a Permanently Lower Plateau?
13Sources: IMF, Countries weighted by PPP
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Ten Year Swap Spread
Sources: Bloomberg 14
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BAA Spread Above Ten Year Treasury
Sources: Bloomberg 15
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Stock Prices Reflect Slower Growth
Sources: Bloomberg, Congressional Budget Office 16
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Debt Stock Rising Rapidly Despite QE
Sources: Greenwood, Hanson, Rudolph and Summers “Government Debt Management at the Zero Lower Bound”;Treasury Q3 2016 Report to Borrowing Committee; Federal Reserve; BEA
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Always A Decent Chance of Recession Intermediate Term
Sources: NBER, Economic Cycle Research Institute 18
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Large Rate Cuts Are Often Necessary
Sources: Bloomberg, Core PCE Deflator from Bureau of Economic Analysis 19
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Zero Long-Term Real Rate: Swaps
Sources: Bloomberg November 2, 2016 20
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Ultra-High Duration Bond Demand
21Sources: Bloomberg, PIMCO
France
UK