The immoderate world economy

This paper explores the connection between the much-debated global current account imbalances of the past decade and the U.S. financial collapse. It argues that the connection is an intimate one, although nothing so simple as cause and effect. Instead, the imbalances were a primary symptom of forces that led directly to the financial crash. The paper goes on to examine lessons for reforming the global financial architecture. A major lesson is the need to take a systemic view of global financial stability - a view that analyzes the global economy much as one would analyze an integrated domestic economy.