03-24-2014, 11:36 AM
In our view, what is missing from the secular stagnation story is the crucial role of the highly unequal wealth distribution. Who exactly is saving too much? It certainly isn’t the bottom 80% of the wealth distribution! We have already shown that the bottom 80% of the wealth distribution holds almost no financial assets.
Secular Stagnation and Wealth Inequality | House of Debt
Click the link for the full article, which is very useful intro to the theory of secular stagnation and offers one mechanism by which this condition could be brought about: chronic oversaving by the wealthy which produces an economy that is chronically demand constrained. Normally, a savings glut lowers interest rates, which increases demand, but if there isn't sufficient credit demand even at very low interest rate, this channel is clogged.