Former U.S. Treasury Secretary Larry Summers recently caused a stir with his warning of sustained economic stagnation in the advanced economies. But while many reject his suggestion of a secular trend, the data support him.
Yes, economic growth has picked up in the United States and the United Kingdom, while the eurozone economy is no longer contracting and Japan shows some signs of responding to "Abenomics." But the global recovery remains very weak, with most advanced economies still performing 10 to 15 percent below pre-crisis growth trends.
It is not difficult to see why the recovery has been anemic. Excessive private-debt creation before the crisis and subsequent attempts at deleveraging have weakened demand considerably.