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Yglesias gets global financial imbalances slightly wrong, I think. Yglesias and Klein and Pearlstein (whom he cites) argue that funky financial products lured foreign investors and then turned out to be terrible investments; but while a bit of that was going on, I could point to data that shows that most of the crappy housing-based assets generated by our financial system ended up in other parts of our financial system, not in the hands of foreigners. A lot of the foreign money flowing into America in the Bubble Years was not flowing into housing or housing-related products; it was going into U.S. Treasury Bonds, and it was money coming from the People's Bank of China. China's central bank wasn't buying high-risk high-yield products; it was buying Treasury bonds that were guaranteed low-yield assets. That was a "savings glut" - a forced-savings glut, if you will.

Update: Setser and the global finance crowd basically support my story...