History shows that the economy and financial markets are dominated by long-term regimes that at some point come to a break point, where one regime gives way to a new one. This shift may not be easy to detect. Trapped in their comfort zones, with a short-term perspective, few may see it coming.

The arrival of Paul Volcker at the helm of the Federal Reserve, after a long period of inflationary pressure, symbolically brought to a close the macro-financial regime of the 1970s (the Great Inflation) and prepared us for the regime we are leaving today (low inflation, low volatility regime), albeit passing through a “bubble and burst” phase in the 1990s. A change in regime is brought about when the imbalances that it causes are no longer tolerated by society. Such a change is also and always one of the institutions (central banks, political parties, etc.) that structure the regime itself. Aware that every force produces a counterforce, like the movement of a swinging pendulum, we see the Volcker sequence now ending.