When the world was a happier place, before economists annexed the lexicon of forensic pathologists, there was much talk about global imbalances. In the final quarter of 2005 the US current account deficit peaked at 6.4% of GDP. Some thought this was a bad thing, although few pinned down exactly why. Others thought it was a “stable disequilibrium”. Export-driven economies, principally in Asia, could in effect provide vendor financing to the US via their high savings rates, foreign exchange reserves and sovereign wealth funds.
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