Matthew Yglesias on the Need to Eliminate the Zero Lower Bound to Avoid Secular Stagnation

A tweet from Ellie Kesselman pointed me to this piece by Matthew Yglesias. The key passage is

As I’ve been saying for a while, humanity could rid itself of the pesky zero bound problem by eliminating physical currency and creating a situation where nominal interest rates can go negative. Demographic shifts and population aging may someday (like “next few decades” not “later this summer”) soon force us to choose between this option and the world economy falling into a basically permanent recession.

That is, Matthew Yglesias is very worried that the natural interest rate might be below zero on a long term interest rate, and an inability to have negative interest rates would therefore be disastrous. I am less convinced that the natural interest rate will be negative on a long run basis (because I am optimistic about future technological progress), but it is definitely worth being prepared. 

You can see links to what I have written on negative interest rates in my bibliographic post “How and Why to Eliminate the Zero Lower Bound: A Reader’s Guide,” and my discussion of issues surrounding the natural interest rate and secular stagnation in The Medium-Run Natural Interest Rate and the Short-Run Natural Interest Rate” and On the Great Recession.