The global financial crisis which began with the subprime mortgage crisis and exploded in September 2008 with the collapse of Lehman Brothers bank, took much of the macroeconomic profession by surprise, even though there were ample early warning signs. Theorists failed to adequately consider the destabilizing cumulative impacts of financial deregulation, hedge funds, electronic trading, shady financial entrepreneurship, moral hazard, regulatory laxness, regulatory hazard ("mark to market" FAS 157), structural deficits, the shift from Keynesian investment stimulus to general aggregate demand management, Phillip's Curve justified perpetual monetary ease, subprime mortgages, derivatives, one-way-street speculation, "too big to fail" psychology, hard asset speculation (real estate, commodities, natural resources, precious metals, art, antiques, jewelry), fiscal abuses, special interest transfers and stealthy Chinese protectionism, beyond normal business cycle oscillations, because they had come to believe that policymakers had learned how to tame the beast. With the advantage of hindsight, two years after the mast,1 both the strengths and weaknesses of the third millennium macroeconomic consensus can be discerned and appraised with an eye toward parsing the future.

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