[This suggests] that global capital flows may be way more problematic than I have historically been willing to credit. I don't want to blame all bubbles on foreign money. But foreign money has two unpleasant characteristics: there is so much of it that it can relatively easily swamp a nation's productive capacity, and it is relatively uninformed about the local market.
I'm not sure where that leaves me. The capital controls of the mid-twentieth century were even worse, especially for emerging markets, where they became both focal points for, and sources of, massive corruption. And one of the reasons America today is such a massively successful economy is that foreign money funded our industrialization. Bubbles may simply be an inescapable side effect. But perhaps it's time to rethink a commitment to global capital liberalization.
I'm not sure where it leaves me, either, especially since this has been an active subject of conversation for a decade already and hasn't produced anything even close to a consensus. But this does seem like the kind of topic that lends itself to my "sand in the gears" theory: we don't need to reinstate capital controls, we just need to slow down the flow of global capital ever so slightly. Even a tiny tax on foreign capital flows could have a significant impact. Ideas welcome on this score.