Professor Philip Lane:

That is a reasonable analogy. When one has a big shock in the world, whether it is the big increase in oil prices in the mid-1970s or the entry of China into the global economic system, that can give rise to large asymmetry. Some parts of the world want to be a net lender but where does that money end up? What is the role of the international financial system in funnelling that money to end users and from the point of view of the end user, just because somebody wants to throw a lot of money at one, is one wise to take it? One has to consider whether those contracts are fair. There was hope in the 2000s because so much of the funding was not sitting on bank balance sheets. In the 1980s various US banks were in trouble because they had lent so much money to Latin America, whereas by and large in the 2000s there was not so much bank lending as securitised bonds and so on. The hope was that the risk would be spread across many investors. Of course, in the end it did not turn out like that.