Starting in the 1980s, everything macro kind of...chilled. Namely, GDP and inflation weren’t nearly as volatile as normal. This period of macroeconomic chill-ness is known as the Great Moderation. While economic expansions were smaller during the Great Moderation than they were in past decades, that’s not what the Great Moderation is known for. It’s known for its moderation...it’s chill, even-keeled nature.
The Great Moderation is generally attributed to a succession of Fed Chairs: Paul Volker, Alan Greenspan, and Ben Bernanke. Bernanke thinks the Great Moderation is probably due to three things: changes in the economy, changes in policy, and pure luck.
The economy became different thanks to the rise of technology and the downfall of regulation. Economic policy became friendlier too, with less protectionism and more openness to trade. Oh, and luck. Unfortunately, ol' Ben thinks that the economic crazy got toned down for a while, and not that the economy is now immune to anything cray.
So...are we still in the Great Moderation? There’s no technical end-date, but many think it’s pretty obvious: the Great Recession, which mainly started in 2008. Others see the Great Recession as nothing other than the greatest speed bump the Great Moderation has yet to see...but that’s all it was—a speed bump.
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Finance: What is the Greater Fool Theory...11 Views
Finance a la shmoop what is the greater fool theory? Oh shiny rocks, tulips,
Bitcoin.....The basic idea in the greater fool theory is
that you're a fool I'm a fool were all fools in the mosh pit [Man standing in a moshpit]
right here and we've all done and will continue to do stupid things like paying
$7,000 for a tulip one that just um you know sits there it doesn't speak it
doesn't divine the future just sits there nor does it guarantee lifetime you [Man eating a tulip]
know sexual prowess if you eat it it doesn't even reproduce in a particularly
virile manner, it's just a tulip well a short term store of wealth that one fool paid
7 grand for making the big bet that there's another fool even more motley
foolish who will pay 8 grand and in Holland a few hundred years ago there
was one clapping wooden shoe wearing blond paid 9 grand for this tulip and [Man carrying tulip]
then another even greater fool paid 10 grand and then another fool paid 11
grand and so on until this most foolish of all tulips sold for $26,000 then what
there another fool well no there wasn't then the flower stopped selling for
$26,000 and probably ended up selling for about 26,000 cents yeah there were
no more fools even greater than the ones that came before so the price plummeted [Person removes price label of tulip]
back to I don't know what was it 4 cents a tulip actually sold for for a normal
tulip back then it's about what it was intrinsically worth and well that was
all she wrote or germinated or whatever the greater
fool theory posits that there is always a greater fool out there to buy your
stuff at a higher and higher price until there isn't a greater fool out there
yeah it's sort of the game of hot potato where you benefit only by holding the [Woman and man juggling a hot potato]
potato usually a very short period of time before dumping its finger burning
love on to someone else who's foolish enough to catch it and the greatest
thing about the greater fool theory... Well we're a planet with lots and lots and
lots of fools...
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