7894bdb0_brary_of_Economics_and_Liberty__ast_Highlights_HIDE_HIGHLIGHTS
[Time] 15:51
Current crisis: set of general phenomena which precede banking crises--this is not a sovereign debt crisis or inflation crisis--yet. We are providing the same medicine to cure the disease that caused the disease, giving banks lots of easy credit and making it easy for people to continue to borrow money. Antecedents; different story about the cause: current account story. Role of the current account and the typical cause of these kinds of problems. Studying capital flows since the early 1990s, Guillermo Calvo; capital flows cycle. Paper with Vincent Reinhart: capital flow bonanzas, running large current account deficits and financing them by borrowing with the rest of the world. Right now, when witch hunts start to emerge after the crisis: is it the regulators? the Fed? Wall Street? But the fact of the matter is that one of the beauties of the work that went into the book is that it cuts across different exchange rate regimes, different political systems, different budgetary situations, more markets, less markets, financial markets--yet common factors emerge, and one is running large current account deficits. If you have a disease that is both a 16-year-old and an 80-year-old are affected by the disease, it manifests itself so that the two are not identical but there are common symptoms. Not just running a current account deficit in one year, but sustained, meaning that over time you are becoming increasingly indebted to the rest of the world.
Reinhart on Financial Crises | EconTalk | Library of Economics and Liberty