Low Interest Rates May Be the New Normal

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Paul Krugman says that low interest rates are likely to be with us for a long time:

Structural change is happening fast — just not the kind of structural change people like to talk about. Never mind the stuff about skill mismatches and all that. What’s really happening fast is the demographic transition [i.e., an aging population], with Europe very quickly turning Japanese. And the US, although growing faster, also turning down sharply.

Add to this the fact that what we thought was normal actually depended on ever-growing household debt, and it becomes clear that historical expectations about normal interest rates are likely to be way off. You don’t have to believe in secular stagnation (although you should take it very seriously) to accept that low rates are very likely the new normal.

If this is true, is it another reason to think that Thomas Piketty might be wrong about returns to capital staying high over the next century even as economic growth slows down?

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DEMOCRACY DOES NOT EXIST...

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In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily bluster—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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