Are We Doomed to High Interest Rates Forever? : Planet Money : NPR

Right now, the economy is running hot. Inflation is high, and central banks are raising interest rates to combat it. But before the pandemic, economies around the world were stuck in a different kind of mess: low inflation, low interest rates, and low growth.

In 2013, Larry Summers has dug up an old term from the Great Depression to explain why the economy is in such a mess: secular stagnation. Olivier BlanchardAnother notable scholar, because he himself made similar observations. Larry and Olivier went on to make the case for why secular stagnation was the defining theory of the economy and why government policy needed to respond to it. They helped reshape many people’s understanding of the economy, and showed that this period of slow growth and low interest rates would continue for a long time.

But today, Larry and Olivier are no longer the partners they once were. With inflation soaring around the world, interest rates are rising too. Earlier this year, Larry announced that he no longer believes in secular economic stagnation. Meanwhile, Olivier thinks we are just experiencing a blip and will return to low interest rates in the near future. He doesn’t think the deeper forces that have led to a secular decline in interest rates are going away. Who is right? The future of the global economy may depend on the answer.

The show was produced by Willa Rubin, assisted by Emma Peaslee, designed by Maggie Luthar, fact-checked by Sierra Juarez, and edited by Jess Jiang.

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