Economic Confessions! US Natural Rate of Interest Hits All-time Low (Never Recovered From 2008 Financial Crisis)

by confoundedinterest17

The global economy never recovered from the carnage created by the financial crisis of 2008. One measure that shows how bad things have gotten is the Laubach Williams “Natural Rate of Interest” or R-star which is now at an all-time low. (R-star is the real interest rate expected to prevail when the economy is operating at its full sustainable level, while the output gap measures the extent to which the economy is currently operating above or below this sustainable level.)

The natural rate of interest was crushed by the financial crisis (aka, subprime mortgage crisis) and never recovered despite ample Fed intervention.

Economic confessions. Note Creed Bratton of “The Office” on the left with his unplugged electric guitar.