Former Federal Reserve Chairman Ben Bernanke may disagree, but hedge fund guru Ray Dalio says we’re in a period of secular stagnation.
“We (the United States, Europe and Japan) are in a period of secular stagnation,” Dalio wrote in an April 7 note obtained by CNBC.com. He said central banks have limited policy tools given near-zero interest rates, which means less lending, less investment, and lower economic growth.
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Dalio says not to expect the debt-fueled growth of the past. “Interest rate declines and debts increasing faster than incomes to pull demand and economic activity higher are largely a thing of the past,” he wrote.
Bernanke, meanwhile, doesn’t buy the secular stagnation case. “Does the U.S. economy face secular stagnation? I am skeptical, and the sources of my skepticism go beyond the fact that the U.S. economy looks to be well on the way to full employment today,” he wrote in a recent Brookings blog post.
Bernanke contends that there will always be profitable investments available in a low interest rate climate, CNBC reports, adding that he says recent sluggish growth has more to do with the post-financial crisis economic cycle then secular stagnation.