Daniel Drezner writes at The National Interest:
Roubini and Mihm do the best job of integrating this part of the story into their analysis and putting its role in the proper perspective. Crisis Economics attributes the proper role to the rise in macroeconomic imbalances, arguing that China and other surplus countries acted as “enablers” for the asset bubble in the Anglo-Saxon economies rather than as the inherent cause of the crash. This is a fair assessment—while capital was sloshing around in the U.S. system, it was the peculiarities of the American financial sector which translated that capital into a housing bubble. Indeed, Crisis Economics outclasses the other books in highlighting both the global origins of and the global fallout from the Great Recession.
MAKING MATTERS worse, while all the foreign money was flowing onto our shores, a wave of financial deregulation and innovation was transforming capital markets. A host of changes allowed the financial sector to run rampant. Each innovation triggered a slew of unintended consequences.
Was it bad luck that the moment hundreds of billions of dollars flow into the US, financial regulation is scrapped so that it can be invested in ever more risky ways, delivering billions of dollars in bonus payments to those involved?
Things happen because people do them. Institutions are build, changed and destroyed by people, which are influenced by incentives. The science that looks into these matters is economics.
Expressions like a wave of financial deregulation and innovation, peculiarities of the American financial sector, “enablers” for the asset bubble, capital was sloshing around – I think this kind of language clouds the issue more than it helps to reveal the (economic) mechanisms that played a part in the crisis. Note especially the fragment capital was sloshing around. The subject is something which is an invention of the mind (credit, or debt, whatever you like), yet it is moving through the physical world, acting. Language is an instrument. Capital was sloshing around is not a good description of what happened.
p.s.: The book by Roubini and Mihm is excellent. Recommended.