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The Levy Economics Institute of Bard College 1
GLOBAL IMBALANCES: The U.S. and the Rest of the World
THE LEVY ECONOMICS INSTITUTE OF BARD COLLEGE
The Levy Economics Institute of Bard College 2
FIGURE 1 Monthly U.S. Trade Deficit in Goods
The Levy Economics Institute of Bard College 3
FIGURE 2 Trade Deficit in Goods as a % of GDP
The Levy Economics Institute of Bard College 4
FIGURE 3 Annual U.S. Trade Deficit in Goods
The Levy Economics Institute of Bard College 5
Accounting Identity of Financial Balances
Current Account Balance
Private Sector
Balance+ =
{Internal
Financial Balance
{
External Financial Balance
GovernmentBalance
THE CONCEPTUAL FRAMEWORK
In 2006 the identity was roughly like this: -3% of GDP -2.4% of GDP = -5.4% of GDP
The Levy Economics Institute of Bard College 6
FIGURE 4 U.S. Main Sector Balances
The Levy Economics Institute of Bard College 7
FIGURE 5 Main Sector Balances with CBO Assumptions
The Levy Economics Institute of Bard College 8
FIGURE 6 Household Debt Outstanding
The Levy Economics Institute of Bard College 9
FIGURE 7 Household Borrowing
The Levy Economics Institute of Bard College 10
FIGURE 8 U.S. Main Sector Balances under the Assumption of Stabilizing Household Debt
The Levy Economics Institute of Bard College 11
FIGURE 9 U.S. Main Sector Balances under the Assumptions of Further Dollar Devaluation and Expansionary Fiscal Policy