from Follow the Money

Big sweeping structural forces

December 1, 2005

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Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

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I recently have been struck by the fact that when US officials talk about global imbalances, they often argue that the imbalances are the product of big, sweeping structural forces in the global economy (the savings glut) rather than anyone's fiscal policies.

UPDATE: Add the Maestroto the list of US officials who attribute the US current account deficit to big, sweeping, structural changes in the US, along with changes around the world.  I personally think it is a bit hard to talk about the reduction in home bias without noting the surge in reserve accumulation by emerging markets ... more later.

And when Chinese officials talk about global imbalances, they too argue that the imbalances are the product of big sweeping, structural forces in the global economy, not something as trivial as currency values or exchange rate regimes.

I suspect that when OPEC officials talk about global imbalances, they too would highlight big, sweeping structural forces in the global economy, not the decision of many oil exporters to save rather than spend their oil windfall, often by running large fiscal surpluses.

It is rather amazing.  Neither the authorities of the big deficit countries nor the authorities of the big surplus countries bear any responsibility for the continued growth of the global imbalances.  And consequently, no one needs to take responsibility for assuring that these imbalances unwind in an orderly way either.

Of course, right now, the market sees no particular need for the imbalances to unwind at all, but that is a story for another day.

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