Secular stagnation, debt overhang and other rationales for sluggish growth, six years on
January 27, 2015 5:00am by
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This is a rather astonishing bit of writing (I hesitate to call it analysis). In review it cites authority for dubious or debunked positions as if they still had full standing and fails to cite authority (so Stiglitz et al are, what, chopped liver?) for positions and research in unequivocal contradiction to their main thesis that debt and deficits are still the big, bad gorilla in the room; e.g., only “some economists” think constrained (austerity) fiscal policies were a serious policy failure contributing to slow growth and unemployment or the failure of governments to initiate large infrastructure projects even when they were fully capable of doing so is “puzzling.”
With Ken Rogoff as author you kind of expect a right wing lala-job of unsubstantiated claims and old failed debunked ideas recycled as God given truths.
What gets me is that once a couple issues are set aside — like throwing a graduate student under the bus as the lead author of a questionable piece of work in making what amounts to an argument for a particular (presupposed?) position rather than a serious analysis of a conundrum — we get down to the parallel of PK’s point as cited by Frwip
There doesn’t appear to be a coherent economic model operating in the Lo & Rogoff paper much less one that would justify elevating debt overhang as more critical than other explanations of sluggish growth and citing that overhang as a serious impediment to even evaluating and comparing other explanations; i.e., the overhang become primary.
As Brad DeLong phrases it in regards to this same article:
“…Debt that is painful enough to bear that it discourages enterprise and spending is also debt that may not be collected in the end, and thus debt that sells at a low price and carries a high face interest rate.
The claim that the pieces of debt selling at record-high prices and carrying record-low face interest rates — which is the case right now for …credit-worthy sovereigns — are in any sense a drag or a headwind seems to me to be simply wrong. I do not understand how people of note and reputation can believe it…“
This, like all of Rogoff’s papers, has not peer reviewed. I like this site but but putting poorly researched papers with click bait titles to hide a non-academic objective isn’t up to this sites standards…. I think Piketty expressed the general academic consensus regarding Rogoff in the quote below:
“We know something about billionaire consumption,” Piketty observed, “but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics.”
Ah, the Bank of International Settlements, the last refuge of Mellonites.
It’s not that they have a coherent analysis to justify their positions. They have positions and they’ll fit the analysis around them.
No matter what’s going on, no matter what the facts are, no matter the situation, they have only two recommendations ” Liquidate ! Liquidate ! Liquidate ! ” and ” Raise the interest rates ! They are too low ! They are too low ! Raise the interest rates ! “.
As PK once said : Are the BIS’s methods unsound? I don’t see any method at all.
Your forgetting a big one: Undercounting of GDP by the BEA. This has been a issue since 2001-7 expansion imo.