This is very much the theme of my speech here at the Swedish Economics Association – weighing the effects of monetary policy today against the effects tomorrow and what challenges this creates. But I thought I’d start by discussing the downward trend in global interest rates and what this means for monetary policy, as it is important to realise that the problems we are grappling with in Sweden are very much influenced, and shared, by the world around us. 3 [23]  Downward trend in global interest rates The financial crisis that broke out in the autumn of 2008 was preceded by a seemingly calm and stable period of low inflation and good economic growth. The period is normally referred to as The Great Moderation. This positive development can be attributed to a number of factors. Ever-faster globalisation led to greater movement of goods, services, labour and capital among countries. This, in combination with various deregulations increased competition on labour and goods markets, contributing to higher economic growth. Increasingly independent central banks focused on achieving low and stable inflation are also considered to have contributed to the positive development. In retrospect, we can now see that major financial imbalances had built up in what appeared to be a stable macroeconomic environment. Central bank monetary policy had successfully stabilised inflation. But this did not prevent the break-out of the more serious economic crisis since the 1930s.
As can be seen, return has been stable with relatively minor variations around just below 9 per cent while the real interest rate has shown a falling trend. After the financial crisis, return on capital has even risen slightly, suggesting good investment opportunities. Investment growth after the financial crisis is in line with such a hypothesis. Figure 4(b) shows that investments have risen relatively rapidly since 2010 and are now close to or above their long-term trend. None of this is easy to reconcile with secular stagnation.7  6 See Gordon (2012). 7 See Gomme et al. (2015) for further discussions. 8 [23]  Figure 4. Real return on capital, real interest rate and investments in the United States 4(a ) Return on capi tal and real interes t ra te  4(b) Investments i n the business sector  10  3000  8  2500 Real interest rate, 5 years Return on capital  6  Investments Investments, nonresidential  2000  4  1500  2  1000  0  500  -2  0  00  02  04  06  08  10  12  14  85  90  95  00  05  10  15  Note. Fi gure 4(a), per cent. Return on capital in the business sector. Broken lines show a verage return on ca pital s ince the year 2000. Real interest ra te refers to 5-year real government bonds. Fi gure 4(b), USD billion.