ABSTRACT
At the time of writing this contribution to the Festschrift for Harald Hagemann’s sixty-fifth birthday, economics is an even more challenging profession than in the 1990s, when the New Economy and related topics were in the focus of political and academic interest (e.g., Hagemann and Seiter 2003). The persistent upswing of the US economy, with high growth rates of GDP and labour productivity, low inflation rates and almost full employment led many economist to assume that the business cycle was surpassed by the novel structures and laws of motion of a real(ly) new economy. While in the 1970s the notion of stagflation captured the simultaneous phenomena of high inflation and high unemployment, the New Economy stood for the opposite. However, reality very unpleasantly taught the economic profession that, as many times before, an upswing will be followed by a recession and depression. More recently, the financial crisis, starting in the summer of 2007 and soon thereafter turning into a world economic crisis, forced politicians as well as mainstream economists to take into consideration that governments still have to play an important role in the economic game, since markets, or at least human beings, are not as perfect as assumed in the dominating theories of the 1990s and 2000s. Besides this, the United States as well as many European countries have to cope with high public debts and related interest payments, making it more and more difficult for them to find investors willing to buy their bonds. Additionally, the members of the Euro area are challenged by the lack of an institution coordinating the public debt in the European Monetary Union, and therefore losing credibility. At the same time, globalization and technological progress in information technologies (IT) made it possible for many so-called emerging economies to gain more influence in the world economy. Ahead of others, China must be considered. Being the biggest exporting economy, China is also the most important creditor of the US government. However, China now seems to be focusing on the financial markets in Europe as well as on resource-rich countries all over the globe.
