The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Monday, June 6, 2011

Told you so: Asian savings did not cause the US sub-prime crisis

Years ago I argued that the Krugman/Bernanke thesis blaming an Asian savings glut for the US sub-prime crisis, and hence the broader GFC, was bogus (see also here). The Australian's David Uren reports today that none other than the global bank to the central banks--ie, the Bank for International Settlements--has similarly concluded that the Krugman/Bernanke claims are wrong:

"THE elevated level of savings in Asia and global payments imbalances had nothing to do with the global financial crisis or the unusually low world interest rates that preceded it. The argument that they did, advanced by US Federal Reserve chairman Ben Bernanke, has diverted attention from the root cause, which is the unconstrained ability of financial institutions to create credit on a global basis, according to an explosive new paper by the research director at the Bank for International Settlements, Claudio Borio."