A black swan in our midst?

A series of related factors have led to what seems to be a permanent change in the global economic landscape. The ideological shift towards liberalism at the end of the 80's resulted in the release of a huge supply of untapped cheap and in some cases skilled labor, prompting firms in developed nations to increasingly relocate production to new emerging players, leading to a long term boost in profit margins that continue to exhibit a surprising degree of resilience to the vagaries of the markets. Tapping into this new supply of cheap labor combined with improvements in inflation targeting and coordination by central banks also explains to a certain extent why inflation has remained relatively tamed despite cyclical and exogenous pressures. Technological leaps in communications such as the advent of the internet in an environment of successive deregulation, the gradual dissolution of trade barriers and dramatic improvements in capital flows have been conducive in providing an almost limitless source of liquidity coming from emerging nations with large savings towards debtor nations such as the U.S. The rapidly changing landscape has also led to an explosion in financial innovations providing greater access to capital and improved risk control. This is not to say that the risk to economic growth in this new environment has been reduced or eliminated altogether. Trade imbalances in both capital and goods continue to widen whilst the average U.S. consumer's spending habits are increasingly challenged by rising fuel prices, a weakening dollar and the ongoing housing debacle.