Saturday, March 21, 2009

The locomotive grinds to a halt

During the boom years, the US consumer was the engine of world economic growth, importing huge amounts of good produced in China, Europe and Latin America. This huge consumption boom showed up in the US current account. At the height of the boom, the US economy was running up a quarterly deficit of over $200 billion.

Things are now very different. The US consumer is going through a period of consolidation. Likewise, the US current account deficit has narrowed sharply. The last data point showed a quarterly deficit that was almost $80 billion lower than the peak.

This sudden contraction in US import demand has pushed many economies, particularly those in Asia, into deep recessions.

So much for decoupling.


  1. A consumption strike in the US kills off the world economy.


  2. The "decoupling" argument was either profoundly stupid, or dishonest. Money is fungible for heaven's sake.