Carmen Reinhart and Ken Rogoff have an alarming paper on parallels between the United States and countries that have experienced financial crises in the past. The bottom line of the paper, which has already gotten a lot of attention, is that we look an awful lot like those other countries — and that if their experience is any guide, things could get really, really bad.

But what I just noticed on a reread is this rather nice line (bear in mind that I was very involved in the Latin American debt crisis of the 80s):

While much praised at the time, 1970s petro-dollar recycling ultimately led to the 1980s debt crisis, which in turn placed enormous strain on money center banks. It is true that this time, a large volume of petro-dollars are again flowing into the United States, but many emerging markets have been running current account surpluses, lending rather than borrowing. Instead, a large chunk of money has effectively been recycled to a developing economy that exists within the United States’ own borders. Over a trillion dollars was channeled into the sub-prime mortgage market, which is comprised of the poorest and least credit worth borrowers within the United States. The final claimant is different, but in many ways, the mechanism is the same.

The truth is that I’m not nearly as pessimistic as some. But comparisons like this do worry me.