This is not an economy blog, this place is more about improving the world. However, there is a quote from Thomas Palley I have run across a few times that makes my feel uneasy, because if he is right, many others are wrong (especially in the media) and we will have lots if improvement to do in decades to come.
Here is the Thomas Palley quote, last time I read it was in the post Why So Little Self-Recrimination Among Economists? from naked capitalism:
"The raised standing of central bankers rests on a phenomenon that economists have termed the “Great Moderation.” This phenomenon refers to the smoothing of the business cycle over the last two decades, during which expansions have become longer, recessions shorter, and inflation has fallen.
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With regard to lengthened economic expansions, the great moderation has been driven by asset price inflation and financial innovation, which have financed consumer spending.
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The important implication is that the Great Moderation is the result of a retreat from full employment combined with the transitional factors of disinflation, asset price inflation, and increased consumer borrowing. Those factors now appear exhausted. Further disinflation will produce disruptive deflation."
Add to this that some jobs (typically industry and farming) has seen and have potential for much better productivity gains than service jobs. That is, as nations having a greater service sector compared to industry sector, we have less potential for productivity growth. No productivity growth and we will certainly not have wage growth and therefore no consumer spending growth.
This is why I fear things will get worse: you can't fix the economy unless you know what's broken, and unless you start talking about all things that is not well structurally, we will never have an easy time finding our way out. Denial is not leadership.
Now, don't forget to go reading the excellent original source: Demythologizing Central Bankers and the Great Moderation
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