Evaluating Causes, Cures and Global Imbalances
A REVIEW OF OUR APPROACH There is no single cause of the US current account deﬁcit and no single solution. More so than for any other country, the US external deﬁcit is the result of the economic (and even political) decisions of a vast multitude of transactors, both government and private, engaged in buying and selling goods, earning and spending, saving and investing, and building and rearranging their wealth. It will change, if at all, when those decisions are revised in response to diﬀerent economic signals, rising wealth and indebtedness, and ever more concentrated and unbalanced portfolios. Alternatively, governments individually or in unison may agree to take corrective actions. From the outset we made clear that this book was not designed to be a polemic, directed to expounding one particular viewpoint. We had no particular barrow to push, nor did we start with a strong set of priors (although we did have some preconceptions not all of which turned out on closer examination to be vindicated). Rather, our aim has been to canvass, and evaluate, a wide range of hypotheses as to, ﬁrst, the origins and sources of the deﬁcit, second, its sustainability, and third, the urgency of corrective action and the consequences of doing nothing. We have come to some conclusions in the process of this investigation, but begin with a brief review of what has been done in earlier chapters. In the ﬁrst chapter we provided some bullet points detailing the extent of the...
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