Great Moderation 2.0 - just dreaming

There is  more talk that we are in another period of economic moderation like the 1990's. A recent Bloomberg story sets the stage. The '90's were noted for its lower variability in GDP  relative to other post-WWII periods which some are suggested is returning. The reason attributed for the first moderation was good monetary policy. It was the period of interest rate targeting. Economists suggested that 50% of the moderation was due to good policy and the rest just luck. It was a time to celebrate Alan Greenspan and all knowing central banks. Of course, this was also the period of the Mexican debt and Asian debt crisis. 

While GDP variability has fallen, it is very hard to say this is associated with a new moderation or good policy. The low growth is more associated with stagnation. The variability around trend may still be high. Certainly, it may not be associated with good policy as the world frets about quantitative easing. QE got us to this point but it is not a stable policy to maintain a globla growth equilibrium. . The debt situation is much worse than the 1990's. The overall picture is that we are in a low risk premium and low volatility environment, but that should not be confused with a new Great Moderation.