Here’s a little quiz for you. Which of the following quantities grew the most between 1998 and 2007?

A) Market value of owner-occupied U.S. homes B) Dollar amount of debt owned by U.S. households C) Dollar value of global trade

Answer below. Don’t peek.

The answer, of course, is C.

According to the International Monetary Fund, the dollar value of global trade rose by 150% from 1998 to 2007

Over the same period, the market value of owner-occupied U.S. homes rose by 132%, and the dollar amount of household debt rose by 135%.

I could twiddle with the start and end dates to make the rankings come out a bit different, but the point would remain. Global trade rose at roughly the same amazing pace as household debt and housing.

We had a credit and housing bubble--does that mean we had a global trade bubble? I think so. Here's a chart of global trade as a share of global GDP.

As of October 2008, the IMF was forecasting global trade as 33% of the global economy in 2008, up from 23% in 1998. That's too big a jump.

If the 'correct' number is closer to 28%, then global trade needs to fall by roughly $3 trillion to get back into line.

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