fiscal house in order, but at a pace that does not forestall a sustained economic recovery. what is needed here is fiscal consolidation that begins slowly, builds over time to substantial magnitude, and is difficult to dismantle – i. e., it requires the commitment of both political parties. the decision of how big the u. s. government should be and what functions it should perform is a political decision that i leave to the voters and our legislators. however, as a nation we need to acknowledge that we must be willing to pay for whatever government services and transfers we want to have. we should not assume that an excess of global savings will always be available to easily finance our public deficits. to be more precise, as of the first quarter of 2011 with statistical discrepancy of 1. 2 percentage points attributed to private balance, the figures are as follows : government balance – 9. 5 percent + 6. 3 percent private sector balance equals current account balance of – 3. 3 percent. bis central bankers ’ speeches the choice of fiscal sustainability is not a political one, it is an economic one and if we do not act voluntarily and preemptively, the market will inevitably force the outcome later – most likely in a much more difficult and messy fashion. moreover, we must recognize that the rest of the world is closely monitoring our ability as a nation to come to grips with our long - term fiscal challenges, and to pay our debts when they come due. this is an important litmus test of our credibility and ability to exercise global economic leadership. but the challenges extend far beyond fiscal policy. we, as a nation, have to take steps that facilitate the needed structural adjustment of u. s. economic activity that will position us to thrive in the next chapter of global economic transformation. we need to make sure the next business cycle will be more sustainable than the last, which was built on an unstable foundation of asset price gains, easy credit and outsized financial - sector profits. this will require a shift in orientation from consumption to export and investment - led growth. as emes have shown us, comparative advantage and global competitiveness are not inevitable consequences of factor endowments – they are the result of the choices we make as nations. there are no easy answers or quick - fix solutions. but in this regard, ensuring broad access to educational opportunity and improving opportunities for people to retool their skills mid - career so they can compete in a rapidly evolving global economy are important

china, the benefits included strong economic growth, technology transfer and the creation of many manufacturing jobs. these developments, in turn, helped foster rising living standards and political stability in china. these outcomes were by no means all the result of a deliberate grand strategy. but i think this is a reasonable, albeit overly simplistic, description of what happened. although the pre - crisis arrangements worked reasonably well for a while, the flaws became increasingly evident over time. looked at from the lens of the developed world, the combination of rapid gains in production capacity and relatively repressed consumption in the eme world helped foster a global deficiency of demand relative to supply. in these circumstances, the united states and many other industrialized economies had to sustain domestic demand at elevated levels in order to achieve “ full employment ” and prevent deflation. for the united states, the consequence was elevated consumption facilitated by asset price inflation, easy underwriting standards for credit and structural budget deficits. of course, this particular outcome was not preordained or caused by the emes. there were multiple combinations of domestic demand consistent with full employment in the united states during the pre - crisis period. for example, if the united states had adopted different policies, it might have shifted the composition of growth toward more business investment and less consumption and housing. but in a disinflationary global environment amid chronic eme trade surpluses, the united states could not achieve a high level of employment with a high level of national saving. looked at from the lens of the emerging world, sustained consumption demand in developed nations induced the emes to continue to emphasize investment and exports. this meant that still poor populations did not reap the full benefit of their labors in the form of increases in real income and consumption commensurate with the gains achieved in productivity and output. also, this system led, in many cases, to poor returns to eme savers. this resulted, in part, from the cost of sterilizing reserves accumulated in the process of managing exchange rates and the use of the banking system as a tool of industrial policy. while it is tempting to draw a line of causation from actions in one part of the global system to the other, this is overly simplistic. rather, we have to think of the global economy as a single system, with outcomes based simultaneously on all the choices and preferences throughout the system. what is new is that the so - called periphery is now weighty enough to