What have we learned from that? One lesson is that the economy’s improved inherent flexibility has helped it cope with shocks which in previous times would probably have derailed growth. Another conclusion, at least on my own part, is that the structural change in household balance sheets which has been under way since about 1995 has consistently been an expansionary factor.
Let me mount one of my hobby horses for a moment here. Reverting back to the discussion of models of the economy, informal or formal, this points to an important gap in knowledge. Conventional models of the macro economy are long on detail about demand, output gaps, inflation and so on, but relatively underdeveloped in the financial sphere.