between 1980 and 2002, for example, the nominal dollar value of world imports rose 5 - 1 / 2 percent annually, while gross external liabilities, largely financial claims also expressed in dollars, apparently rose nearly twice as fast. 1 this observation does not reflect solely the sharp rise in the external liabilities of the united states that has occurred since 1995. excluding the united states, world imports rose about 2 - 3 / 4 percent annually from 1995 to 2002 ; external liabilities increased approximately 8 percent. less - comprehensive data suggest that the ratio of global debt and equity claims to trade has been rising since at least the beginning of the post - world war ii period, though apparently at a more modest pace than in recent years. 2 from an accounting perspective, part of the increase in the ratio of world gross claims to trade in recent years reflects the continued marked rise in tradable foreign currencies held by private firms as well as a very significant buildup of international currency reserves of monetary authorities. rising global wealth apparently has led to increased demand for diversification of portfolios by including greater shares of assets denominated in foreign currencies. gross liabilities include both debt and equity claims. data on the levels of gross liabilities have to be interpreted carefully because they reflect the degree of consolidation of the economic entities they cover. were each of our fifty states considered as a separate economy, for example, interstate claims would add to both u. s. and world totals without affecting u. s. or world gdp. accordingly, it is the change in the gross liabilities ratios that is the more economically meaningful concept. for the united states, for example, the ratio of external liabilities to imports of goods and services rose from nearly 1 - 1 / 2 in 1948 to close to 2 in 1980. the comparable ratios for the united kingdom can be estimated to have been in the neighborhood of 2 - 1 / 2 or lower in 1948 and about 3 - 3 / 4 in 1980. more generally, technological advance and the spread of global financial deregulation has fostered a broadening array of specialized financial products and institutions. the associated increased layers of intermediation in our financial systems make it easier to diversify and manage risk, thereby facilitating an ever - rising ratio of both domestic liabilities and assets to gdp and gross external liabilities to trade. 3 these trends seem unlikely to reverse, or even to slow materially, short of an improbable end to the expansion of financial inter

##mediation that is being driven by cost - reducing technology. uptrends in the ratios of external liabilities or assets to trade, and therefore to gdp, can be shown to have been associated with the widening dispersion in countries ’ ratios of trade and current account balances to gdp to which i alluded earlier. 4 a measure of that dispersion, the sum of the absolute values of the current account balances estimated from each country ’ s gross domestic saving less gross domestic investment ( the current account ’ s algebraic equivalent ), has been rising as a ratio to aggregate gdp at an average annual rate of about 2 percent since 1970 for the oecd countries, which constitute four - fifths of world gdp. the long - term increase in intermediation, by facilitating the financing of ever - wider current account deficits and surpluses, has created an ever - larger class of investors who might be willing to hold crossborder claims. to create liabilities, of course, implies a willingness of some private investors and governments to hold the equivalent increase in claims at market - determined asset prices. indeed, were it otherwise, the funding of liabilities would not be possible. with the seeming willingness of foreigners to hold progressively greater amounts of cross - border claims against u. s. residents, at what point do net claims ( that is, gross claims less gross liabilities ) against the united states become unsustainable and deficits decline? presumably, a u. s. current account deficit of 5 percent or more of gdp would not have been readily fundable a half - century ago or perhaps even a couple of decades ago. 5 the ability to move that much of world saving to the united states in response to relative rates of return would have been hindered by a far lower degree of international financial intermediation. endeavoring to transfer the equivalent of 5 percent of u. s. gdp from foreign financial institutions and persons to the united states would presumably have induced changes in the prices of assets that would have proved inhibiting. * * * there is, for the moment, little evidence of stress in funding u. s. current account deficits. to be sure, the real exchange rate for the dollar has, on balance, declined about 15 percent broadly and roughly 25 percent against the major foreign currencies since early 2002. yet inflation, the typical symptom of a weak currency, appears quiescent. indeed, inflation premiums embedded in long - term