Quote of the Day: We Are Doomed to Financial Bubbles Forever

Get your news from a source that’s not owned and controlled by oligarchs. Sign up for the free Mother Jones Daily.


John Quiggin writes that he believes the study of macroeconomics went off the rails in 1958, when the Phillips curve was invented. He’s not even very impressed with the success of the Taylor-rule style interest rate targeting that gave us the Great Moderation between the late 80s and 2008:

Implicit in this view is the idea that the Great Moderation was a policy success and that the subsequent Great Recession was the result of unrelated failures in financial market regulation. My view is that the two can’t be separated. In the absence of tight financial repression, asset price bubbles are regularly and predictably associated with low and stable inflation. Central banks considered and rejected the idea of using interest-rate policies to burst bubbles, and the policy framework of the Great Moderation was inconsistent with financial repression, so the same policies that gave us the moderation caused the recession.

On this view, it sounds like we’re just well and truly screwed, since a Bretton-Woods/Regulation Q version of the economy isn’t coming back anytime soon. I don’t know if John is actually right about this, but it seemed worth tossing out for discussion. If he’s right, what’s the answer?

BEFORE YOU CLICK AWAY!

Mother Jones was founded to do journalism differently. We stand for justice and democracy. We reject false equivalence. We go after stories others don’t. We’re a nonprofit newsroom, because the kind of truth-telling investigations we do doesn’t happen under corporate ownership.

And the essential ingredient that makes all this possible? Readers like you.

It’s reader support that enables Mother Jones to devote the time and resources to report the facts that are too difficult, expensive, or inconvenient for other news outlets to uncover. Please help with a donation today if you can—even a few bucks will make a real difference. A monthly gift would be incredible.

payment methods

BEFORE YOU CLICK AWAY!

Mother Jones was founded to do journalism differently. We stand for justice and democracy. We reject false equivalence. We go after stories others don’t. We’re a nonprofit newsroom, because the kind of truth-telling investigations we do doesn’t happen under corporate ownership.

And the essential ingredient that makes all this possible? Readers like you.

It’s reader support that enables Mother Jones to devote the time and resources to report the facts that are too difficult, expensive, or inconvenient for other news outlets to uncover. Please help with a donation today if you can—even a few bucks will make a real difference. A monthly gift would be incredible.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate