The US housing market has collapsed, placing severe strains on the financial system and, as a direct consequence, workers and companies are suffering. But the real concern is not that there will be a few quarters with below average real growth – it is that the period of the great moderation may be over.

The past 20 years have brought extraordinary prosperity. Growth has risen the world over and this higher growth has come with a remarkable stability. Comparing the 1970s with the most recent decade reveals that the volatility of real growth in the industrialised world has reduced – the standard deviation of real gross domestic product growth has roughly halved.