Reserve accumulation and easy money helped to cause the subprime crisis

Guillermo Calvo outlines the buliding blocs of a macro model that would explain current crisis:

A view that is gaining popularity as one of the fundamental explanations for the current crisis is that emerging markets’ voracious appetite for international reserves coupled with record-low US policy interest rates and lax financial regulation to produce a frantic “search for yield,” the creation of fragile financial instruments, and occasionally outright fraud.