Amit Rajaraman

Lecture 19

Some of the major events since the start of the millenium are:

  • The dotcom bubble which peaked on March 10, 2000. NASDAQ reached 5123.5 points and quickly lost about three-quarters of its value.
  • 9/11 attacks on the World Trade Center and the Pentagon and the ensuing war on Afghanistan.
  • US invasion of Iraq (launched on March 20, 2003).
  • 2007/8 global financial crises - began with the collapse of Lehman Brothers on September 15, 2008. This is also known as the subprime crisis.
  • The euro crises (in October 2009) when Greece revealed a “black hole” in its budget, that is, deficits larger than previously known.
  • Outbreak of Syrian Civil War on January 26, 2011, which began with peaceful protests in Damascus.
  • Outbreak of the Ebola epidemic in West Africa in December 2013, when a 2 year old boy died in Guinea.
  • 2015 outbreak of MERS in South Korea.
  • Massive flow of refugees from Syria, Iraq, and Eritrea towards Europe in Summer 2015 (60 million in 2014 alone). This is the highest ever recorded to leave their home country.
  • Chinese stock market plunges 30% in June/July 2014 after rising 75% since the previous October.
  • The price of oil fell sharply in 2015/16 falling below $30 per barrel before recovering slightly. This mainly affected Russia, Venezuela, and Saudi Arabia.
  • Human wave of migrants from Syria, Libya, Iraq, Pakistan, Afghanistan, and others to the safe havens of Europe, which caused a crisis.
  • On June 23, 2016, Brexit happened and Britain voted (narrowly) to leave the European Union. The migrants to Britain were a contributing factor.
  • On November 8, 2016, Donald Trump won the elections with promises having an impact on globalization.
  • On September 3, 2017, North Korea conducted its 6th nuclear tests. There was a “war of words” between Trump and Kim Jong-un.
  • Trump’s China-related trade tariffs caused a trade war.
  • For India, bank recapitalization and GST (a unified task structure) were major. Liberalization made our borders porous, opening us to the global economy.

What is the difference between Ghana, India, and South Korea? The difference between the first two is due to the physical and human capital, whereas that between the latter two is attributed to knowledge.

Macroeconomic events arise from the interaction of many people trying to maximize their own welfare - firms, consumers, the government, forex dealers, FII, MNCs, RBI, etc. We study the economy as a whole.