9 <mark>1991-92, and 2001-02). The permanent stabilization of economies became a leitmotiv and the journey to prosperity seemed inevitable. The collapse of the New York stock exchange in 2000-2001, a crash triggered mainly by the fall of dot-com ventures, was a turning point. In an attempt to shield the United States from the type of recession and deflation observed in Japan during the 1980s, the Federal Reserve Bank (FED, American central bank) lowered its interest rates in a very aggressive way. Between January 2001 and June 2003, the federal funds rate was lowered twenty-seven times, from 6.5 percent to 1 percent! During that period, most economists saluted the purported ingenuity of FED governor Alan Greenspan, who was projected in the media as an unmatched economic wizard, the greatest artist of the history of finance and macroeconomics.</mark> <mark>This loose monetary policy touted as the only means of curbing the recession did not cause the resurgence of inflation, thus confirming the myth that central bank macroeconomists were infallible experts. But it insidiously caused the formation of a new financial bubble, and laid the foundations of the much deeper crisis which today is affecting the world economy. It has spread quickly in an increasingly “globalized” world: savings used to fund economic activity do not come exclusively from domestic sources. They also come from abroad—as a matter of pure accounting, countries with a surplus in their balance of payments must invest in countries with current account deficits. In addition to the incentive they received over the past decade from the expansionist monetary policy of the FED, American investors and bankers could also rely on savings inflow not only from Asian countries (China, Japan, South Korea) where consumer spending was weak and income growth strong, but also from oil exporting countries eager to invest their reserves in lucrative markets. Net foreign savings in the United States, estimated between 1 and 1.25 percent of the GDP in 1995, thus leaped to 6 percent of the GDP in 2006, the equivalent of 825 billion in today’s dollars</mark><sup>7</sup> <mark>. American financial markets were flooded with excess liquidity, which was quickly converted into unregulated financial innovations on Wall Street and all major international financial markets. Obsessed with their fear of recession, central banks around the world pursued their strategy of interest rate cuts, all the more so because the indicators at their disposal did not show any risk of inflationary pressures.</mark> <mark>In this spiral where credit, investment and consumption were encouraged, there was one last aggravating factor: the aggressive budget policy adopted by the US government, which resulted in a rapid deterioration of the fiscal balance. In its bid to finance the war effort in Iraq and Afghanistan, the administration of President George W. Bush increased military expenditure while lowering taxes at the same time. The budgetary surplus which it had inherited in 2000 quickly turned into a large deficit, financed through Treasury bills purchased mostly by the Asian countries with surplus savings. It is interesting to note that during this same period, Sub-Saharan African countries, the poorest in the world, made efforts to reduce their budget deficits, thus conforming to macroeconomic dogmas no longer in force in the western world.</mark> 7 Source: Bernanke,(2009).