Karl Smith Against the Marx-Mellon-Hoover-Hayek-Schumpeter Axis
Karl Smith:
Can We Explain This Without A Global Credit Shock: Capital formation is investment and in most cases is dominated by construction.... It really looks like something “different” and global happened in 2008.... [T]here is a near universal nick in the series in 2009. The only country not fully nicked was Indonesia, the dark green line spanning the gulf.... [S]omething unprecedented happened in 2009 and it happened everywhere and it had to do with capital formation.
It's not clear how we can explain this with any factors that have to do with local monetary policy or inflection points in technology. Maybe we could say that the interruption in Patterns of Trade and Specialization was so profound that it impacted everyone. That seems a stretch, its not clear why such a decentralized process could have such a universal effect. It would almost be like a global PSST virus that shutdown lots of connections at once...
