Why did borrowing from the world’s poor countries get rich countries like the United States in trouble?
A. A number of very rich countries, of which the United States was the biggest and most important, absorbed this money, but not for investment. Their corporations didn’t want or need this money. Instead it went into a large fiscal deficit—which the United States ran ever since the Bush tax cuts in the early 2000s—and into massive household borrowing. The collapse of savings and the huge borrowings by British households and American households triggered a huge housing bubble. We saw a huge increase in debt and indebtedness, and it also became associated with the creation of very sophisticated financial instruments that spread the bad mortgage debt across the world, which made the crisis much worse. It was quite clear to me there was going to be a correction, and when that correction occurred, there was likely to be a very significant recession in the United States that would inevitably become worldwide because the U.S. consumer had become such an important source of demand for the entir
