The central economic problem — one that exacerbates all our other serious challenges, from debt to entitlements to persistently low employment — is a sluggish rate of economic growth. Worse than sluggish, really. At less than 2% per annum real growth, the economy is barely limping along. We are growing at perhaps just a third or a fourth the speed (or worse!) compared to previous recoveries from recessions of similar severity.
One school of thought, however, says that there’s not much we can do about it. The nature of the panic — with housing and financial institutions at its core — makes stagnation all but certain. Nonsense, says John Taylor of Stanford, in this new video (part 2 of 3) hosted by the Hoover Institution’s Russ Roberts:
In the next video, Yale’s Robert Shiller reinforces the point about housing. The author of the Case-Shiller Home Price Index questions whether the Fed can reflate home prices with “one button” and whether its zero-rates-forever policy might not do more harm than good. It’s more about “animal spirits,” Shiller says, which means housing is more a function of economic growth than growth is a function of housing.
