Some numbers, such as the low saving rate and the colossal current-account deficit, suggest that the economy's course is unsustainable.
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Since the current-account balance equals the net saving of the private and public sectors, a budget deficit boosts the external deficit.
Instead, his legacy will linger in the shape of the biggest economic imbalances in American history: a negative household saving rate and a record current-account deficit (see chart 1).
If this succeeds in stimulating demand, Japanese saving will fall and the current-account surplus in due course will narrow. (In the short term, however, most of the effect will be masked by a cheaper yen.) Perhaps demand in Japan is already stronger than the figures suggest.
The real blame for America's current-account deficit lies with its lack of saving, not the Chinese yuan.
One way to demonstrate this is to remember that the gap between domestic saving and investment must be equal to the current-account balance, which is probably measured more accurately.
This slump in private saving is also reflected in America's widening current-account deficit.
And it is worth remembering that slower domestic spending and higher saving is exactly what America needs to correct its current-account deficit.
The result of robust exports and weak imports linked to anemic domestic spending is its perennial current account surpluses, which, along with earlier high saving by households and now by businesses, allow it to finance its huge government deficits internally, with foreigners owning only 5%.
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That is nonsense, as can be seen by looking at the current account from the other end: as the difference between a country's saving and its investment.
To understand why, one needs to focus on an accounting relationship: by definition, the sum of net private-sector saving (saving less investment) and public-sector saving (the budget balance) must be equal to a country's current-account balance.
One of the reasons investors have lost confidence in some Asian currencies is that many countries are running big current-account deficits in other words, they are investing more than they are saving at home.
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