we’ve run out of options for economic stimulus. it is time to raise the retirement age, commensurate with huge increases in life expectancy since social security was enacted.

We investigate the options for policymakers given this shortage of traditional ammunition, including: (i) reducing the risk of recession; (ii) reverting to quantitative easing; (iii) moving away from inflation targeting; (iv) using fiscal policy to replace monetary policy; (v) using fiscal and monetary policy together in a bid to introduce so-called “helicopter money”; and (vi) pushing interest rates higher through structural reforms designed to lower excess savings, most obviously via increases in retirement age. We conclude that only the final option is likely to lead to economic success. Politically, however, it seems implausible. As a result, we are faced with a serious shortage of effective policy lifeboats.

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