What causes the ebbs and flows of the business cycle? In the first of two videos, Chicago Booth's Amir Sufi argues that one key factor is the financial sector and its willingness to lend. As credit becomes more and more available at the household level, the economy booms—but when household debt becomes unsustainable, it sows the seeds for a bust. For an explanation of how inequality may fuel credit-supply expansions, see part two of this series.
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The emphasis should be on new companies, ideas, and products that allow the country to own the high end of the value chain.
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