Title: Resolving the global imbalance
First published: 2008
Description: "The large trade and current account deficits of the United States cannot continue indefinitely because doing so would constitute a permanent gift to the U.S.  economy.  The process that will cause this gift to shrink and that will eventually cause it to reverse is a fall in the dollar.  The dollar will fall as private investors and governments become unwilling to accept the risk of increasing amounts of dollars in their portfolios, especially in a context in which they realize that the dollar must fall to reduce the trade imbalance.  Although a more competitive dollar is the mechanism that will cause the U.S.  trade deficit to decline, the fundamental requirement for a lower trade deficit is an increase in the U.S.  national saving rate.  So a rise will be driven by higher household savings of the coming years as the two primary forces that depressed savings in recent years are reversed: the exceptionally rapid rise in household wealth and the high level of mortgage refinancing with equity withdrawal"--National Bureau of Economic Research web site.
LC classification: HB1