To start the week off, today’s chart comes from Scotty Barber at Reuters, and shows the volatility in US GDP growth (gross domestic product), with two historical periods clearly marked.
The Great Moderation from the mid 1980’s to the GFC was well-named but transitory (a fact lost on most market economists who pine for the days of easy volatility). For the chart watchers out there, note the equally spaced and increasing volality periods that belied the underlying thesis of taming the business cycle.
Also note that prior to this period, whilst volatile, US economic growth was much faster (and as we are now appreciating, much broader particularly for middle class households):
This has been repeated in Australia, where our GDP growth was much more robust and widespread before the mid 1980’s, even though the country did not “suffer” a mining boom and had severe productivity problems (including widespread tariffs and currency controls). The downward trend is obvious:
The Great Moderation is a period in history that has passed and The Great Volatility has returned. But will US growth?