So the system progressively levered up over time .... which makes it slowly but steadily more vulnerable to asymmetric shocks ... each shock hits ... and each time it leads to be little bit of lost ground ... largely as keeping struggling debtors alive, requires more debt and reduces the aggregate level of productivity ... at the same time the system is tweaked to limit the damage that adding a bit of extra leverage might cause if it gets misused ... the regulation then also reduces lender risk tolerance and velocity.

The regulation, productivity effects, slower velocity of money and burdensome leverage combine with less demographic growth to reduce trend growth ... and the policy response to low growth and shocks (ie more QE to keep the system functioning in the absence of velocity) is channelled into asset prices making inequality an issue ... growth becomes lower and more focused on a small number of markets and sectors ... and the political effects of inequality show up ... creating even more shocks and uncertainty that reduce growth .... over time the result is that cycles struggle to gather any momentum and get smaller ... in many respects they are being ironed flat ....

This makes secular trends so much more visible ... the cycle may still roar back ... but it will need one helluva boost to do it ...

Some people doubt this has to do with demography ... but that's almost always predicated on the idea that in-retirement spending outpaces in retirement earnings ... the persuasive argument to counter this is that the rapid inflation in care costs combined with increased expectations of post retirement lifespan means that all but the wealthiest retirees worry about running out of money as they approach retirement ... this means that they do not dissave ... they hoard cash and bonds and some stay working ... flattening the curve and driving rates to zero is supposed to force them to dissave ... but often they simply work and save more ... this isn't a liquidity trap is a velocity trap ...