of emerging markets. as the old saying goes, the only constant is change. but the speed of that change is not constant. the pace of change tends to pick up around major transitions before settling down again when some sort of equilibrium is reached. the great moderation was a period of relatively steady change during which world output grew steadily and inflation was low and stable. the global financial crisis created a major upheaval that led to the great recession. the subsequent recovery has been remarkably drawn out and almost 10 years on, you could say that we have been living through a great transition. i would like to highlight three pivotal transitional forces that have shaped our economic and political landscape. first, after decades of rapid expansion, world trade has slowed down considerably. during 2012 to 2015, world trade volumes grew at around 3 percent per annum, much less than the pre - crisis average of 7 percent for 1987 - 2007. cyclical factors have certainly been at work, but the slower pace of growth relative to world gdp points to deeper structural forces at work. chief among these is the waning impact from the integration of china and central and eastern european countries into the world economy, as well as the diminished room for further international fragmentation of production through global - value - chain trades. more speculatively, rising protectionism may have also dampened trade in recent years. nevertheless, the level of trade integration across the world is as high as it has ever been. second, economies the world over have seen a rising contribution of the service sector to growth. a key driver of this transformation has been technological innovation, especially in digital communication. for the world as a whole, the share of services as a proportion of gdp is now as high as 70 percent. this shift has not been confined to advanced economies but can also be seen in emerging markets. in china, for example, the service sector has grown to more than half of gdp in 2015, much of it driven by a surge in e - commerce and the expansion in logistical services required to support it. moreover, as the cost of digital technology declines, a wider range of services are becoming more tradable including design, marketing, business processes, and education. thus not only has the service sector become more important within a country, the share of international trade in services has also increased markedly. the third, and perhaps most unsettling transitional force, is the ultra - accommodative monetary policy stance adopted by major advanced economies. what started out as extraordinary

incentives for homeowners with underwater mortgages. homeowners who try to obtain a modification of the terms of their mortgages are all too frequently subject to delay and disappointment, while those who simply stop paying their mortgages have found that they can often stay in their homes rent free for a time before the foreclosure process moves ahead. moreover, many homeowners believe, reportedly on the basis of communications from servicers, that the only way they can qualify for modifications is by stopping their mortgage payments and thus becoming delinquent. quite apart from the impact upon families who lose their homes, the dominance of foreclosures over modifications raises macroeconomic concerns. the number of foreclosures initiated on residential properties has soared from about 1 million in 2006, the year that house prices peaked, to 2. 8 million last year. over the first three quarters of this year, we have seen a further 2 million foreclosure filings, and an additional 2. 3 million homes were in foreclosure at the end of september. all told, we expect about 2. 5 million foreclosure filings this year and next year and about 2. 4 million more in 2012. while our outlook is for filings to decline in coming years, they will remain high by historical standards. currently, more than 4. 5 million mortgage loans are 90 days or more past due or in foreclosure. these numbers compare to just 520, 000 permanent loan modifications executed under the treasury department ’ s home affordable modification program ( hamp ) and an additional 1. 6 million proprietary loan modifications by servicers participating in the hope now alliance program. 2 the federal reserve believes that in most cases the best way to assist struggling borrowers is a mortgage modification allowing them to retain their home with an affordable mortgage payment. in a housing market where values have declined so much, following a period in which all actors relied upon rising house prices to sustain mortgage practices, foreclosures simply do not make sense as a preferred response. foreclosures are costly to all parties and more broadly to our economy. lenders and investors incur financial losses arising from the litigation expenses associated with the foreclosure process and the loss on the defaulted mortgage when the foreclosed property sells at a liquidation price that is substantially less than the loan balance. local governments must contend with lower property tax revenue and the ramifications of neglected properties that may threaten public safety. additionally