May 24, 2019

There Is No Economic Boom

“For a decade now, the people whose job it is to predict the economy’s performance have made the same mistake, again and again and again. They have been too optimistic.

The pattern started during the 2007-09 financial crisis, of course. But it didn’t end there. In the immediate aftermath, the Federal Reserve was too quick to see “green shoots” sprouting across the economy. And in the years since, forecasters at both the Fed and in the private sector have repeatedly made forecasts that turned out to be too sunny.

I was inspired to dig into these forecasts — and the errors in them — after reading a new academic paper last week, by Lawrence Summers, the former Treasury secretary, and Lukasz Rachel, of the Bank of England. That paper is part of Summers’s continuing argument that the economy is suffering from something called “secular stagnation.” The economy isn’t simply enduring a slow recovery from the crisis. Its problems are deeper, as I lay out in the column.”

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