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Summers would go on to suggest that secular stagnation “may be the defining macroeconomic challenge of our times”. There followed a major debate between heavyweight economists about whether he was right, but for several years the global economy contradicted him by growing steadily.

Now, however, this looks to be at an end. Look no further than the OECD projections from March 6, which foresee all advanced economies growing much more slowly than anticipated a few months ago. The left-hand chart below shows the OECD projections from last May, while the right-hand chart shows the latest outlook, complete with red arrows to indicate the sharpest downward revisions.

OECD

The overarching global theme seems to be Donald Trump’s trade war and the fact that central banks have been tightening monetary policy: the US Federal Reserve has hiked interest rates four times in the past year, while the European Central Bank is no longer “printing” money through its programme of quantitative easing. There are additional local reasons, such as UK fears about a hard Brexit, or excessive levels of private sector debt in China. Underlying all of this, however, is the growing feeling that secular stagnation is a major drag behind the scenes.

Back in fashion

The theory was originally put forward in 1938 by the Harvard economist Alvin Hansen in response to the Great Depression. He argued that America’s economy was suffering from a lack of investment opportunities linked to waning technological innovation; and not enough new workers due to an ageing population, too little immigration, and the closing of the old economic frontier in the American West.

In Hansen’s view, the weak growth in the economy was therefore here to stay – “secular” means “long term” in this context. Yet he would soon be proved spectacularly wrong as World War II provided a big temporary boost to the economy in the form of military spending, followed by a post-war baby boom and rapid technological progress in the 1950s and 1960s. Little more was heard of secular stagnation until Larry Summers’ intervention.

At the core of the theory today is real interest rates. This refers to the long-term interest rate, meaning the rate of return on ten-year government bonds, after inflation has been stripped out. For example, if a country’s long-term interest rate is 1% but the rate of inflation is 2.5%, the real interest rate is -1.5%.

When you take a global average of real interest rates from different countries, my own research shows that the global rate has declined from more than 5% in the early 1980s to below 0% after the financial crisis of 2007-09. Today, real interest rates remain negative in many advanced economies, including Japan, Sweden, Switzerland and the entire eurozone.

Summers has pointed to several structural factors behind this long-term decline. In an echo of what appeared true in 1938, rich countries are ageing as birth rates decline and people live longer. This has pushed down real interest rates because investors think these trends will mean they will make lower returns from investing in future, making them more willing to accept a lower return on government debt as a result.

Other factors that make investors similarly pessimistic include rising global inequality and the slowdown in productivity growth. It is a major paradox that labour productivity, the most important source of long-run economic growth, is actually rising much slower today than for decades, even though technological progress has seemingly accelerated.

This decline in real interest rates matters because economists believe that to overcome an economic downturn, a central bank must drive down the real interest rate to a certain level to encourage more spending and investment. This is referred to as the level required to reach full employment. Because real interest rates are so low, Summers and his supporters believe that the rate required to reach full employment is so far into negative territory that it is effectively impossible.

The remedy

Summers argues that this problem is why the massive cuts to headline interest rates after the financial crisis did not solve the problem. In other words, monetary policy was actually much less expansionary than many people believe (even though quantitative easing was actually helpful here). Not only that, there is now substantial evidence that austerity policies in places like southern Europe made things significantly worse.

The upshot is that in the eurozone and elsewhere, there is little or no room to cut interest rates when the next recession comes – probably fairly soon given the current expansion is already a few years old. Central bankers will meanwhile be wary of using more quantitative easing, since it has generated a lot of political backlash.

‘No stagnation here, mate.’ Markus Mainka

So what to do instead? Interestingly, the one country not to have had a recession in almost 30 years is Australia, which has enjoyed very high population growth and has never seen interest rates as low as many countries. This suggests that in the long run, more immigration might be a vital part of curing secular stagnation. Summers also heavily prescribes increased government spending, arguing that it might actually be more prudent than cutting back – especially if the money is spent on infrastructure, education and research and development.

Of course, governments in Europe and the US are instead trying to shut their doors to migrants. And austerity policies have taken their toll on infrastructure and public research. This looks set to ensure that the next recession will be particularly nasty when it comes. Alvin Hansen may have been wrong in the 1930s but his analysis is looking increasingly persuasive today. Unless governments change course radically, we could be in for a sobering period ahead.

 

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The Trudeau government is cheerleading a controversial United Nations initiative that has the potential to fundamentally change Canada.

It’s called the Global Compact for Safe, Orderly and Regular Migration, and UN representatives are meeting in Morocco in December to discuss and adopt this global agreement.

It may sound like just another gathering of out-of-touch elites patting themselves on the back, and the compact’s text insists the agreement is non-binding. But the ideas proposed are not your run-of-the-mill aspirational pledges.

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This UN compact is unprecedented and truly radical. It seeks to make immigration a universal human right.

“Refugees and migrants are entitled to the same universal human rights and fundamental freedoms, which must be respected, protected and fulfilled at all times,” reads the document’s preamble.

The agreement doesn’t simply apply to bona-fide refugees — those fleeing war and persecution whose government has failed to protect them. It applies to all migrants.

It seeks to change international law and norms on migration, and blur the distinction between refugees and migrants — the latter merely seeking more economic opportunity but failing to do so according to a country’s established immigration rules.

The compact stops just short of saying that every person from around the world has a right to live in Canada and become a Canadian citizen.

And it gets even worse. Alongside describing a world with no borders and no meaningful citizenship, the document includes a particularly disturbing section about the media.

One of the “guiding principles” is a “whole-of-society approach” to promoting mass migration, including the role of the media.

It calls upon governments to “promote independent, objective and quality reporting… and stopping allocation of public funding or material support to media outlets that systematically promote intolerance, xenophobia, racism and other forms of discrimination towards migrants.”

So much for a free press.

The UN wants governments to actively intervene in the media and pick and choose which journalists are worthy of promoting, based on a radical ideology and far-left worldview.

Is this what the Liberal government’s new $595-million media slush fund seeks to do?

The prime minister and his top officials are known for name-calling and attacking anyone who disagrees with their dogma on immigration, diversity and multiculturalism.

Liberal officials frequently accuse opponents of being intolerant, xenophobic and racist for raising legitimate concerns about illegal immigration, border security and terrorism.

Are these accusations going to be tied to funding decisions for the media?

Will recipients of Trudeau’s media fund be prohibited from criticizing open borders and mass migration?

Will funding be tied to an attestation to promote UN propaganda?

The Trudeau government has played a leading role in advancing this UN scheme; two Trudeau cabinet minister’s admitted so much in a September article in Maclean’s Magazine.

“The UN’s global compact on refugees could be a game-changer — and Canada is well-placed to make it a reality,” they argue.

This dystopian UN plan seeks to erase borders, destroy the concept of citizenship, undermine the rule of law and circumvent state sovereignty. It would change what it means to be Canadian and prevent the media from criticizing these fundamental changes.

Several of our allies, including Australia, the U.S. and Israel have already pulled out of this disastrous UN compact. Across the world, political leaders and respected journalists are ringing the alarm bell.

In Canada, however, the Trudeau government is welcoming this UN scheme, while most Canadian journalists are failing to inform Canadians about the radical changes on our doorstep.

https://www.youtube.com/watch?v=fIONOZl-6zo

Global Compact for Migration