What Secular Stagnation? Oh, This Secular Stagnation

In a recent blog post, Citadel's latest trader and part-time Brookings blogger, Ben Bernanke, asks "does the U.S. economy face secular stagnation? I am skeptical, and the sources of my skepticism go beyond the fact that the U.S. economy looks to be well on the way to full employment today."We, on the other hand are skeptical of Bernanke's skepticism, for one simple reason: reality.

Below is a chart progression of the past 6 years of the FOMC's own "potential real GDP growth" estimates. It shows, without a trace of doubt, that even with the Fed's perpetual overoptimism, the US is now clearly in a phase of secular stagnation, one from which there is no escape until the issue which Bernanke dares not mention, i.e., a record debt overhang, is somehow resolved.

Here is BofA's commentary:

There has been a slow capitulation that the concept of normality has changed after this recession. Forecasts for potential growth have been slashed along with expectations for the equilibrium Fed funds rate. The consensus, based on the Blue Chip survey, has taken down its forecast for potential GDP growth from 2.8% pre-recession to 2.6% in 2010 and 2.3% today. The FOMC has similarly revision down its long-run GDP forecast.

And visually: