Financial Imbalances in the World Economy

The current account deficit of the US is by far the largest that the world has ever seen, equivalent to about 7 per cent of US national income and nearly 2 per cent of world income. The present situation relies on large capital inflows into the US, but the concentration of investment in the highest-income regions of the world is socially damaging, destabilising and prejudicial to the effective development of resources in the world as a whole. The US deficit can be contained in a less damaging manner only if the rest of the world contains its own surpluses and boosts investment in other regions.