More in the Weeds

Janet Yellen, the head of the U.S. Federal Reserve Bank, is worried about this economic beast called "secular stagnation" which may force her to keep interest rates at their historically low levels for an extended period of time ... see: CNBC Story. I realize that this in quite a bit of "in the weeds" kind of discussion ... but then, isn't that where most economists spend their lives? Anyhow, the bottom line of this concern on her part is that raising interest rates in the United States might not be warranted as quickly as she had assumed because of  "demographic factors and a slower pace of productivity gains from technological advances."

The real bugbear here, I believe, is the stagnant or declining population growth in most of the free world ... and demographic advances are at the root of most economic expansion.

The cold hard truth of all these economic machinations is that raising interest rates in the United States may not even now be a option on Yellen's part ... for interest rates at the more "normal" levels of 5 or 6% would cause interest cost for the federal debt of $18+ trillion to quickly squeeze out other budget items ... primarily social spending ... an untenable position. But, if interest rates do not return to these normal levels, then the Fed has no tools or leverage to deal with the next economic crisis which surely is also lurking in these very same weeds.

This is not just a United States' concern ... for most of the rest of the developed world has also painted themselves into this same corner of eternally-low interest rates.. Monetary stimulus has become the opiate of most democratic societies and, I think, this has the radical left salivating ... seeing this as the malady that eventually may well bring down capitalism.

And well it might.

Afterward: For more in-the-weeds economics mowing, see: Washington Post Article. (Tip of the hat to Steve Hayward at the Powerline Blog.)