Paul Krugman on Secular Stagnation

Good blog entry by Paul Krugman this weekend on secular stagnation.

A synopsis of the entry is:

• The great increase in debt that fueled the expansion between 1985-2007 is over and won't be back again.
• The decrease in the rate of growth of potential output due to demography but also due to productivity.
• This decline in the growth of potential output affects investment spending.
• Estimated decline in aggregate demand due to drop in debt and drop in growth is 4%.
• To offset this drop, interest rates need to stay low and real rates need to be low.
• Balancing current account could help but it is unlikely.
• Most likely way is a continuing weak dollar, low rates,  and a high inflation target.

Take a look at the post as it brings up some good points.