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up foreign exchange reserves. by doing so, public entities essentially substitute themselves to private agents in managing and allocating part of the nation ’ s net foreign savings. most likely, their choices and preferences will be different from those of the private sector and, therefore, their intervention would alter the country ’ s external position, tilting it towards holding foreign assets in liquid instruments. the first three factors – information asymmetries, exchange and sovereign risk – account for the well known “ home bias ” exhibited by most investors and asset managers who tend to privilege their own domestic assets when deciding on portfolio allocation. they also explain why, until recently, most emerging economies had to live with the “ original sin ” of not being able to issue public debt denominated in their own currency. because information asymmetries have been reduced through the development of modern securities markets, emerging economies have somehow freed themselves from this constraint, although less than often assumed ( hausmann and panizza, 2010 ). the last two factors – differences in financial development and public interventions – may be more pervasive and significant. together, they have a major impact on the composition and direction of capital flows, as well as the level and persistence of global imbalances. global imbalances in the 21st century current account imbalances have increased both in amplitude and durability during the last decade. in fact, they have become a permanent characteristic of our economic environment. this, by itself, may be a consequence of increased financial integration and greater reallocation of savings across national borders. since, at the same time, real long term interest rates have kept to historically low levels, the situation has been characterized, as a “ saving glut ” ( bernanke, 2005 ), a concept which has come to dominate our thinking about the international economy. however, for the saving glut to result in growing imbalances, net savings have to be more and more asymmetrically distributed across nations. in addition, for more than a decade now, capital has been continuously flowing “ uphill ”, i. e. from poor to rich countries with current accounts surpluses in emerging economies mirrored in growing deficits in the us. this is one of the most salient and puzzling features of modern economic history and has attracted a lot of attention. some explanations focus on the domestic drivers of private saving behaviours in both emerging and advanced economies. cyclical factors, such as productivity shocks,