Assignment #6, J. Helms

The article "Revenge of the Glut," by Paul Krugman, was published in the New York Times. This article is giving the background of this financial crisis we are in. It's directed to everyone arounthe world. Basic argument is that the whole thing started in Asia when they were in financial crisis and to turn it around, they bought foreign assets. They began exporting capital. The result is that there was alot of cheap money in the world which created the trade deficit. This lead to financial institutions lending money out to people who could not afford it and hide the risk on paper to make it look like the people had money. So now, because the money disappeared, people are starting to save their money instead of spending it and this is causing businesses to collapse. People are becoming more thirfty.