It seems something similar has happened with our economy. The Federal Reserve has been very good at putting out small fires in the economy; for example, the 1987 stock crash, the 1997 Asia crisis, LTCM in 1998, and the dot-com bubble of 2001. As Krugman puts it:
(1985-2007) were the years of the Great Moderation - an extended period during which inflation was subdued and recessions were relatively mild.But this resulted in a large increase in financial "underbrush" in the form of lower interest rates, lack of regulation, acceptance of risky behavior, etc. and finally an out of control financial fire. Posted by mjm at September 6, 2009 02:49 PM