http://www.ft.com/cms/s/0/9b998ed0-9a9e-11e0-bab2-00144feab49a.html#axzz1Ph3YdMuf
Some of those factors should fade in the second half, letting the growth rate recover to between 3 and 4 per cent.
SS SAYS
4% GROWTH RATE
IS IT SO?
I DONT SEE WHO WOULD CONTRIBUTE THAT TO?
===
In the end, US labour-market exceptionalism will deliver new jobs and strong growth as in the past.
====
The second danger also works through productivity, but arises from the role played by debt in this cycle. Under circumstances such as today’s, with households striving to cut debt and interest rates at zero, economies can behave in strange ways. In a paper last year, Paul Krugman of Princeton and The New York Times, and Gauti Eggertsson of the Federal Reserve Bank of New York drew attention to the possibility of a “paradox of toil”, akin to the paradox of thrift (whereby if everyone tries to save more, the economy shrinks and so does aggregate saving). The logic of the paradox of toil is simple. Suppose the supply of labour increases, or productivity rises. Initially, prices would tend to fall. If nominal interest rates are stuck at zero, the real interest rate and burden of debt both rise. This leads overleveraged consumers to cut spending still more. Demand is not just slow to respond: the economy shrinks.
Some of those factors should fade in the second half, letting the growth rate recover to between 3 and 4 per cent.
SS SAYS
4% GROWTH RATE
IS IT SO?
I DONT SEE WHO WOULD CONTRIBUTE THAT TO?
===
In the end, US labour-market exceptionalism will deliver new jobs and strong growth as in the past.
====
The second danger also works through productivity, but arises from the role played by debt in this cycle. Under circumstances such as today’s, with households striving to cut debt and interest rates at zero, economies can behave in strange ways. In a paper last year, Paul Krugman of Princeton and The New York Times, and Gauti Eggertsson of the Federal Reserve Bank of New York drew attention to the possibility of a “paradox of toil”, akin to the paradox of thrift (whereby if everyone tries to save more, the economy shrinks and so does aggregate saving). The logic of the paradox of toil is simple. Suppose the supply of labour increases, or productivity rises. Initially, prices would tend to fall. If nominal interest rates are stuck at zero, the real interest rate and burden of debt both rise. This leads overleveraged consumers to cut spending still more. Demand is not just slow to respond: the economy shrinks.
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