Saturday, January 16, 2010

Did Foreigners Cause America's Financial Crisis?



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By Stephen Gandel -   Friday, Jan. 15, 2010 (Read more: http://www.time.com/time/business/article/0,8599,1954240,00.html?xid=newsletter-daily#ixzz0cmT6uv0i)

Much of the fault of the financial crisis has been heaped on Wall Streeters, unscrupulous mortgage lenders and weak regulators. But in a new research paper, economist Ricardo Caballero says there is another major group of contributors to America's monetary mess who are not getting the blame they deserve: foreigners.Blame China, Saudi Arabia and, yes, Canada.
"There is no doubt that the pressure on the U.S. financial system [that led to the financial crisis] came from abroad," says Caballero, who is the head of MIT's economics department. "Foreign investors created a demand for assets that was difficult for the U.S. financial sector to produce. All they wanted were safe assets, and [their ensuing purchases] made the U.S. unsafe."/.../

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