Who Is To Blame for the Great Recession?

This paper uses empirical information and economic theory to show that the primary causes of the Great Recession of 2008 were the non-market policies of China and energy producing countries, which resulted in the current account imbalances that existed before the recession began. The savings of these countries did not have the normal beneficial effects on global interest rates and investment because they were used to buy only US debt instruments and none of other developed countries. This asymmetric effect was the result of the fixed exchange rate, which the surplus countries maintained against the dollar and not against other currencies that otherwise might have shared the burden of absorbing the high levels of savings.