Here are a few excerpts from Stephen Roach’s latest at Project Syndicate:
The United States has a classic multilateral trade imbalance. While it runs a large trade deficit with China, it also runs deficits with 87 other countries. A multilateral deficit cannot be fixed by putting pressure on one of its bilateral components. But try telling that to America’s growing chorus of China bashers.
America’s massive trade deficit is a direct consequence of an unprecedented shortfall of domestic saving…
In the US, there simply is no net saving any more. Since the fourth quarter of 2008, America’s net national saving rate has been negative – in sharp contrast to the 6.4%-of-GDP averaged over the last three decades of the twentieth century. Never before in modern history has the world’s leading economic power experienced a saving shortfall of such epic proportions.
…The renminbi has, in fact, appreciated by 30% relative to the US dollar since mid-2005. In broad multilateral terms – a far more meaningful gauge because it measures a currency’s value against a broad cross-section of a country’s trading partners – the “real effective” renminbi currently stands about 8% above its most recent 12-year average (1998-2010).
The ultimate test of any nation’s character is to look inside itself at moments of great challenge. Swept up in the blame game, the US is doing the opposite. And that could well be the greatest tragedy of all. After all, America’s 88 deficits did not arise of thin air.
I suggest you read the whole thing.