Stagnation
Categories: Econ
Stag Nation: a country chock-full of deer.
Ughhhh...you’ve been waiting in this line forever. Forever. What’s the hold up? The same thing happens to the economy sometimes. Stagnation is when growth is slooooowwww...or even non-existent.
How slow are we talking? Anything below 2-3% is pretty slow. For more mature economies, stagnation can be expected more often. There’s just not the same room for growth as there is in less developed, emerging economies.
You know stagnation when you see it. Unemployment numbers are up, people are probably not spending or borrowing a ton. Blech. Stagnation isn’t a recession, but it’s sure boring being on an economic plateau of slow-to-no growth. Talk about a buzzkill.
Governments try to fight stagnation the Keynesian way, by trying to get people to spend. How do they get people to spend? Well, for one, government programs spend more themselves. And two, they give the people more money. No, not free money, unfortunately...but the Fed can increase the money supply by buying back Treasury securities from banks. Which means the banks have more money to lend out at a cheaper rate, basically putting loans on sale...which is called “quantitative easing” if you’re feeling fancy. We sure are.
