Will we ever go back to the Great Moderation?

Ben Bernanke was the person who championed the idea of the Great Moderation, a period of stable growth and calm price behavior. The Great Moderation was attributed to good monetary policy and luck, both of which are now in short supply. The luck does not seem to exist when the balance sheets of consumers have been destroyed in the housing crunch. Credit bubbles need a long time to adjust. Good monetary policy is also in short supply. Not that the Fed isn't trying its best, but the degree of uncertainty means that we are not sure what will happen with the Fed buying of assets. We ill only know whether we have good policy ex post.

The poor luck environment means that the days of Great Moderation have ended and are unlikely to return anytime soon.