ABSTRACT
Relative valuation Q theory does a tolerable job in tracking the nearly five-decade-long decline in growth rates of investment and the economy, and the correlation of this creeping stagnation with capital's rising share. Falling growth rates over nearly half a century should have elicited alarm bells among economists. Historical references to Say's Law and a Keynesian "inverse" suggest the possibility that the recent stagnation might be tied to history in a larger way than just being a mild analogue of the 1930s. Oliver Blanchard and Lawrence Summers questioned whether the destabilizing factors associated with finance undercut the reputed self-correcting properties of a modern economy. Free cash is generated not just by government deficits but by the deficits of households as well. This free cash model allows us to understand how debt stimulants countering stagnation have been intimately intertwined with the growth of speculative free cash.
