According to FT.com, if the surplus countries do not expand domestic demand relative to potential output, the open world economy may even break down. As in the 1930s, this is now a real danger.
According to forecasts from the International Monetary Fund, the aggregate excess of savings over investment in surplus countries will be just over US $2 trillion (see chart).
We are all in the world economy together. Surplus countries must willingly accommodate necessary adjustments by deficit countries. If they decide to sit on the sidelines, while insisting that deficit countries deserve what is happening to them, they must prepare for dire results.
The economy must be rebalanced, with stronger external balances as the counterpart of smaller domestic deficits.
The following charts present Largest current account surpluses, Largest current account deficit and US sectoral financial balances as a percentage of GDP:
Sources :
- FT.com: Global imbalances threaten the survival of liberal trade, December 2 2008 19:53
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