Tags: Taylor | secular | stagnation | government

John Taylor: Idea of Secular Stagnation is Bunk; Government's the Problem

By    |   Monday, 06 January 2014 07:15 AM

The argument being advanced by former White House adviser Larry Summers and others that the economy is in a period of secular stagnation doesn't hold water, says Stanford University economist John Taylor.

"The evidence continues to mount that government policy has been to blame for the disappointing economic performance in recent years," he writes in The Wall Street Journal.

"Yet many don't want to hear it, and they offer a series of alternative explanations including most recently the re-emergence of a chestnut, secular stagnation."

Editor’s Note:
Obama Donor Banned This Message (Shocking)

The secular stagnation proponents say it began 10 years ago, when the rate of return on capital (real interest rates) fell below the normal post-World War II levels, says Taylor, former Treasury undersecretary for international affairs.

Secular stagnation "implies there should have been slack economic conditions and high unemployment in the five years before the [financial] crisis," he notes.

"But it was just the opposite. There were boom-like conditions, especially in residential investment, as demand for homes skyrocketed and housing price inflation jumped."

So what's responsible for slow business investment and hiring?

"That is most likely explained by policy uncertainty, increased regulation, including through the Dodd-Frank and Affordable Care Acts," Taylor writes.

David Rosenberg, chief economist at Gluskin Sheff +, also takes issue with the secular stagnation crowd. "Of course the economy has been weak. But it is not because of any 'secular stagnation,'" he writes in a commentary obtained by Business Insider.

"It is because we had a recovery held back by intensive balance sheet repair — but in two critical sectors, not just one: the household and the federal government."

Editor’s Note: Obama Donor Banned This Message (Shocking)

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Economy
The argument being advanced by former White House adviser Larry Summers and others that the economy is in a period of secular stagnation doesn't hold water, says Stanford University economist John Taylor.
Taylor,secular,stagnation,government
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2014-15-06
Monday, 06 January 2014 07:15 AM
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