episode took a very heavy toll on the real economy, we argue that this was not a surprising outcome. In particular, historical …

that the U.S. would experience a sudden stop of capital flows, which would unavoidably drag the world economy into a deep … of exposing the economy to a systemic panic. This structural problem can be alleviated if governments around the world … instead that the root imbalance was of a different kind: The entire world had an insatiable demand for safe debt instruments …