Rolf Englund IntCom internetional
America's current account deficit is due more to bubbles in asset prices than to a misaligned dollar.
At the core of the problem is a chronic shortfall in domestic saving. With America's net national saving averaging a mere 1.4 per cent of national income over the past five years, the US has had to import surplus saving to keep growing.
America's aversion to saving did not appear out of thin air. Waves of asset appreciation - first equities and, more recently, residential property - convinced citizens that a new era was at hand. Reinforced by a monstrous bubble of cheap credit, there was little perceived need to save the old-fashioned way - out of income.