Four years ago I put in my Macro class notes a preliminary list of the biggest macro stories of the previous decade. The great moderation and the housing bubble have changed and today the biggest macro stories are completely different although some of these are still important. Here they are in no particular order:
1. income inequality
2. the US absorbed 70 per cent of the rest of the world’s surplus capital, but consumption has accounted for 91 per cent of the increase in gross domestic product in this decade. savings-glut vs. “money-glut” hypothesis. If we live in the savings-glut world, the US current account deficit is protecting the world from deep recession. If we live in the money-glut world, that very same deficit is threatening the world with a dollar collapse and, ultimately, even a return of worldwide inflation.
3. "great moderation" - increase in stability
4. rise of trade
5. growth of China (and other parts of Asia)
6. housing bubble? - related to cheap money.
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