Nick Nasad
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Great Graphic: Global Current-Account Imbalances Over Last 25 Years

(courtesy of The Economist)

Current account imbalances are critical to measuring the pressures on a given country, its finances, and its currency. Looking at the graphic above, its important to not the huge current account deficit that the US ran between 1999 and 2008. When a country runs a current account deficit it needs to pay for that deficit with financial assets. In the US's case this mean issuing loads of Treasuries, that were actively bought by China since it was running a large current account surplus during this time. This had the impact of keeping US interest rates low, and stimulating a credit and housing bubble in the US, that popped in 2008.

Since then though, the US current account has improved with the last 5 years and as a percentage global GDP is at its lowest level in 16 years. Part of the reason for the improvement is the increase in oil and gas production in the US the last few years as a result of the "shale" revolution.

One more interesting note is Germany (in orange) which has been running a nice current account surplus since 2002, a positive for the locomotive in Europe, and the Euro-area as a whole, excluding Germany is neutral. In other words, despite the troubles the Euro-zone has with high government debt loads and weak periphery banking systems, at least in Germany, the zones' current account deficit is overall positive.

- Nick