I am suspicious of the idea of a new paradigm, to use that word, as an entirely new structure of the economy.
What do we mean by the “new normal”? And how real is it?
While a reading of postwar economic history indicates that economic recoveries eventually pick up speed after recessions (see Figure 7.1), numerous forecasters have projected a different outcome this time around. In the aftermath of the Great Recession, economists and other observers are predicting a steadily below average growth recovery—a disturbing scenario that has become known as the new normal.
The new normal coinage is often credited to investment strategists at the Pacific Investment Management Company (PIMCO).1 In 2009, they argued for a significant slowing in trend growth due to “de-levering, de-globalization, and re-regulation.” Since 2010, the term has also become associated with the earlier mentioned Reinhart and Rogoff book on the historical fallout from financial crises, such as the one that triggered the Great Recession.2
If the new normal school ...