Global impact of US economic woes

IT is a policy mistake to downplay, let alone ignore, the seriousness of the implications of the unsustainable current account deficit of the US, both within and without. The US current account deficit has continued to soar without respite in recent times, at the rate of roughly US$2bil a day, setting an all-time record close to 6% of gross domestic product (GDP) in 2004. 

It is simple arithmetic that the reverse side of the balance-of-payments current account deficit of the US comprises the surpluses of some of its trading partners. Thus, the US accounts for about 70% of the current account surpluses of other countries, notably China, Japan and Germany.