Paul Schemelzing goes back in history to bust Secular Stagnation theory

Paul Schemelzing goes back in history to bust Secular Stagnation theory

A history of over 7 centuries has shown that the times as they presently are particularly with respect to the interest rates are not too much different as the people have been led to have a belief, as per a research which has gone as far back as the 14th century.

As per a fact, the climate of the low rates of interest has been a rule mostly than an exception and has indicated that even the rates of interest if negative must not cause any significant aberration and might be there permanently.

A work from Bank of England’s Paul Schmelzing is a counter to the theory of economics which is popular and known as the secular stagnation. This idea has been put forth prominently by the former economist of the White House Larry Summers as it contends that low growth rates along with the environment of low rates are likely to stay the way they are and have been linked with the causes which are not likely to leave anytime soon.

However, by the tracing of these rates back to the year 1311, Schemelzing has found that the situation currently is in congruence with the results which have been there in the course of time.

He recently said that against the context of long-term, the rates which are currently depressed are actually converging back to a trend in the history which makes a point about the secular stagnation environment completely misleading and has suggested that irrespective of the fiscal and monetary responses, the rates may soon enter the territory of negatively being permanent. This has come in the wake of a global debt of $11 trillion which is continuing the carrying of negative yields.

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