DeLong is asking: Lost productive capacity in the last recession

The closest macro measure to productivity we have is velocity, the rate at which we trade. Down by nearly 2/3 since 1996. We should be able to hold 1.9.  What happened?

Not sure, but there might be miscounting we have to include that.  Much of the velocity has been absorbed in the web.


The recessions have been taking their toll. And the increasing burden of entitlement spending. Let's add in growth.

The relationship is not so clear. Growth has taken two steps down, but still hangs in at 2.5%. What else? Rates down and inflation down over the series. Could we be slowly replacing money? Is the transaction cost of old style paper just uncompetitive?

Is this the ageing of our current central banking regime?

What else? Rising debt in government.
Inadequate Keynesian response?  We did no Keynesian in 81 or 92, and did the V. We did a bit of the Keynesian in 2008 and did the V. No, the 2.5% growth is just the new normal, been building for years.

How about this. A 40 year central banker regime that is designed to last only one generation. A new technology banking regime being born on the web.