The New Normal Servaas Storm

The U.S. economy is suffering from two interrelated diseases: secular stagnation rather than growth, and polarization of jobs and incomes. The two disorders have a common root in the demand shortfall, originating from the ‘unbalanced’ growth between technologically ‘dynamic’ and ‘stagnant’ sectors. In this context, to assume that potential output growth is determined by exogenous factors of ‘technology’ and ‘demography’, while demand growth is simply irrelevant in the long run, can be a mistake.

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