Why Investors May Be Lulled Into a Moderation Trap

The video discusses the current market conditions characterized by low volatility and the potential risks of returning to a 'great moderation' phase. It highlights how policy efforts to smooth out market fluctuations can lead to increased risk-taking, referencing Hyman Minsky's theory that stability can lead to instability. The video also explains the concepts of volatility and skew in risk assessment and examines the current state of leverage in the US economy, particularly in the corporate sector and commercial mortgages.

What concerns are raised about the current state of market volatility?

How does the concept of 'great moderation' relate to current economic policies?

In what ways has the absence of inventory cycles affected economic recessions?

What role does leverage play in the potential for economic instability?

What indicators suggest that imbalances in the economy may be forming?