Here is year-over-year growth in capital formation in about 45 countries. Capital formation is investment and in most cases is dominated by construction. Some of the data is nominal, some of it is real. I actually think the discrepancy helps my point.


The data starts in 1960 and comes up to the present day. It really looks like something “different” and global happened in 2008. There is a lot of noise and some individual countries moving way off track. Also new countries are added to the set as time goes on.

However, there 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. The slowdown in capital formation was only slight there. We could even say that the importance of oil in Indonesia “explains” its outlier status, but I don’t even want to go there.

Even with Indonesia its really looks like something unprecedented happened in 2009 and it happened everywhere and it had to do with capital formation.

Its 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.