Sophisticated finance does bring benefits
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This determination to run surpluses has proved wise: Brazil, Russia and South Korea have all drawn heavily on reserves during the current crisis. But a precaution that makes sense from the perspective of one country can prove toxic for the global system as a whole. If everyone is trying to run a current account surplus, a corresponding deficit must show up somewhere. And so it did, in America. Capital from emerging markets poured into Wall Street, inflating the subprime bubble.
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