But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?
Why might this be happening? One answer could be slowing population growth. A growing population creates a demand for new houses, new office buildings, and so on; when growth slows, that demand drops off. America’s working-age population rose rapidly in the 1960s and 1970s, as baby boomers grew up, and its work force rose even faster, as women moved into the labor market. That’s now all behind us. And you can see the effects: Even at the height of the housing bubble, we weren’t building nearly as many houses as in the 1970s.
Another important factor may be persistent trade deficits, which emerged in the 1980s and since then have fluctuated but never gone away.
Just maybe, we are bumping up against the limits of growth - not that output capacity is failing to grow, but demand is failing because various factors (increasing robotization, globalization, slowing population growth) conspire to keep more and more money out of the pockets of those who would spend it? It's a Keynesian recipe for permanent depression.