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GLOBAL IMBALANCES: The U.S. and the Rest of the World

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FIGURE 1 Monthly U.S. Trade Deficit in Goods

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FIGURE 2 Trade Deficit in Goods as a % of GDP

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FIGURE 3 Annual U.S. Trade Deficit in Goods

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Accounting Identity of Financial Balances

Current Account Balance

Private Sector

Balance+ =

{Internal

Financial Balance

{

External Financial Balance

GovernmentBalance

THE CONCEPTUAL FRAMEWORK

In 2006 the identity was roughly like this: -3% of GDP -2.4% of GDP = -5.4% of GDP

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FIGURE 4 U.S. Main Sector Balances

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FIGURE 5 Main Sector Balances with CBO Assumptions

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FIGURE 6 Household Debt Outstanding

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FIGURE 7 Household Borrowing

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FIGURE 8 U.S. Main Sector Balances under the Assumption of Stabilizing Household Debt

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FIGURE 9 U.S. Main Sector Balances under the Assumptions of Further Dollar Devaluation and Expansionary Fiscal Policy