Three years into this epochal crisis and still not much light at the end of the tunnel. The “advanced economies” of the Western world have imploded. The celebrated concept that market forces would balance things out, the “efficient markets hypothesis”, is no longer working and proved to be unsound. Same for the other pillar of most modern economics: the rational expectations theory. It was devastating to believe that globalization would strictly favor the West: the opposite took place. The world has entered uncharted territory and needs new economics. Yet, it has difficulty in admitting it and is resisting necessary and inescapable changes.
This article was originally published by Roubini Global Economics.