Assignment #6- Michael Kirschbaum

"Revenge of the Glut", written by Paul Krugman", attempts to explain the deep-rooted economic problem facing the world. The article refers to the Asian financial crisis of 1997-1998 as the direct cause of the global collapse. When Asia began exporting large amounts of capital to the rest of the world, giving other countries the illusion that their economies were prospering, these same countries began rapidly investing. Eventually the excessive savings would be their undoing, as the markets collapsed, reducing the value of their gained wealth. Krugman points out that this process had the worst effect in America, due to its unregulated banks. Bankers led many into risky investments as an easy method of enrichment. Now, not only are we largely in debt, but the value of our assets has dropped considerably. This same problem explains the collapse of other nations with large cash flows, such as Ireland, Iceland, and Estonia. Basically, confidence within large cash flow nations allowed for excessive investing and shortened the foresight of the current financial recession. Despite the global problems the "saving glut" has caused, people continue to save, finding relief in property investments and thrifting, furthering the cycle. Krugman ends the article by reminding the reader that we're still looking for a way to recover from the crisis.