Looking next to the right, we are going to sum up global savings glut, European,
and all other countries.
And here we see about 2.5 trillion total increase in the amount
that's been purchased during this time period from abroad, 2.5 trillion.
Now that's 2.5 trillion at the same time we were only producing
about 1 trillion of new government debt.
That's the green bar, that's all the way over to the right and
another 1.5 trillion approximately of agency debt.
So all of the new debt produced in the United States by the government and
by the government agencies was effectively soaked up during this time period
by foreign buyers, leaving no additional capacity for
investors in the United States.
What were they to do?
We can see what they actually did do.
They bought other AAA stuff, not this little sliver of red,
which is corporate highly rated bonds.
Those are limited, there's just not that many of them out there.
Instead, what they bought was this purple and
the purple here is residential mortgage backed securities.
That had to fill the overall gap between the amount that was demanded from abroad
and domestically, and the total amount that was being produced naturally without
thinking about the market's needs by the U.S. government and its agencies.
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