Last January, I presented a paper at the ASSA meetings offering my own take on the state of the world, entitled “The Financial Crisis Through the Lens of Global Imbalances”. My main point was that dollar recycling broke down as many of us expected it would, but not at the international level; rather, the breakdown occurred in the transmission mechanism that linked households to capital inflows. There were other surprises too, but nothing that would alter the conclusion that astronomic US current account deficits were ultimately culpable.
I revised the paper over the summer with the intention of publishing it, but, having received a request to make additional changes, decided it was a creature of its moment, and I should just let it be. The next iteration is on my calendar for December; I will consider the arguments of Obstfeld and Rogoff, among others, and try once more to slay the conventional wisdom. Meanwhile, if you want to see what I was thinking back in the day, you can find it here.