The Great Moderation
Practice moderation in all things, including moderation.1
HE GREAT MODERATION was the title chosen by Ben Bernanke for a speech he delivered in February 2004. The speech was given to celebrate and explain the U.S. economy’s escape from what had been widely expected to be a serious and prolonged recession, following the boom and bust in technology shares. His speech began with this sentence: “One of the most striking features of the economic landscape over the past twenty years or so has been a substantial decline in macroeconomic volatility.”2
These words continued to ring true right up to the bankruptcy of Lehman on September 15, 2008.
Bernanke’s speech built on the work of two MIT economists, ...