Industrial Insight

We fund growth… | April 23, 2012

Our deficits fund growth…

http://www.pimco.com/EN/Insights/Pages/The-Elusive-Equilibrium-How-Financial-Markets-Shape-Global-Rebalancing-.aspx

Emerging Markets Watch
April 2012

The Elusive Equilibrium: How Financial Markets Shape Global Rebalancing

On average for the last three decades, a 1 percentage point increase in the U.S. deficit translated into a 1 percentage point increase in EM growth. Unfortunately, global rebalancing implies that process running in reverse, where declines in the U.S. trade deficit – fewer imports from the rest of the world – pull down growth in emerging market countries. Note that the U.S. deficit does not fully determine the rate of EM growth: EM countries can outperform under some circumstances, while at other times they may underperform. But the U.S. external balance historically has exerted a powerful gravitational force on the rate of growth in emerging markets, suggesting that evolving away from dependence on the U.S. requires profound structural changes in the global economy.

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I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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