“. . . So low population growth can cause persistent spending weakness, a phenomenon diagnosed in 1938 by the economist Alvin Hansen, who awkwardly dubbed it “secular stagnation.” The term and concept have been revived recently by Larry Summers, and on this issue I think he’s right.
Secular stagnation can be a problem, because if interest rates are very low even in good times there’s not much room for the Fed to cut rates during recessions. But a low-interest-rate world can also offer major policy opportunities — if we’re willing to think clearly.
For what we’re looking at here is a world awash in savings with nowhere to go: Households are eager to lend money out, but businesses don’t see enough good investment opportunities. (Bitcoin doesn’t count.) Well, why not put the money to work for the public good? Why not borrow cheaply and use the funds to rebuild our crumbling infrastructure, invest in the health and education of our children, and more? This would be good for our society, good for the future, and would also provide a cushion against future recessions. . . . “