Friday, August 15, 2014

VOX EU SECULAR STAGNATION BOOK - comment 1


I'm reading through the intro to this Vox EU book on secular stagnation and have one comment so far:

What's the problem?

One assertion is that savings has exploded (because of demographics) past the point where productive investment can mop it up.

I don't buy that: there's lots of opportunity for productive investment all over the world right now. Five billion people are still living in mud huts; come back to me when they're all drinking Pepsi and shopping at Ikea.

Fact is, EM demographics are probably exploding one hell of a lot faster in the next 50 years than DM savings will be exploding. This "secular stagnation" seems a tremendous opportunity to funnel a large amount of cash into the EMs to develop them. Again, come back to me with your complaints when there's a "greying crisis" in Laos.

The secular stagnation story really still seems like the snotty whine of the rentier class, about how they're no longer able to make 5% a year off the poors. Know something, rich boy? Pay the poors more money and they'll be able to afford carrying more debt.

Is "secular stagnation" supposed to be something more than the simple artefact of fourty years of misguided austerianism and plutocratic class war against the workers?

Then that got me thinking to government debt. In an ideal world, government creates debt to pay for investment in future productivity growth, which then pays down the debt incurred. Well, if you take a country like the USA, what is the NPV of all necessary future investment? What is the NPV of (say) all future US road construction and repair out to 2050?

The US' NPV of future investment should be a lot higher now than it was 100 years ago, or even 50 years ago. Frankly, I'd expect the capital intensiveness of US growth is a lot higher than it was in the postwar decade, or certainly the wild west years.

Capital is supposed to go toward production of more and more growth. If capital's not going there, maybe it's because it's too ignorant. Maybe the problem is the decadence of the rentier class.


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