1. The Levy Economics Institute of Bard College 1 GLOBAL IMBALANCES: The U.S. and the Rest of the World THE LEVY ECONOMICS INSTITUTE OF BARD COLLEGE

2. The Levy Economics Institute of Bard College 2 FIGURE 1 Monthly U.S. Trade Deficit in Goods

3. The Levy Economics Institute of Bard College 3 FIGURE 2 Trade Deficit in Goods as a % of GDP

4. The Levy Economics Institute of Bard College 4 FIGURE 3 Annual U.S. Trade Deficit in Goods

5. The Levy Economics Institute of Bard College 5 Accounting Identity of Financial Balances Current Account Balance Private Sector Balance += { Internal Financial Balance { External Financial Balance Government Balance THE CONCEPTUAL FRAMEWORK In 2006 the identity was roughly like this: -3% of GDP -2.4% of GDP = -5.4% of GDP

6. The Levy Economics Institute of Bard College 6 FIGURE 4 U.S. Main Sector Balances

7. The Levy Economics Institute of Bard College 7 FIGURE 5 Main Sector Balances with CBO Assumptions

8. The Levy Economics Institute of Bard College 8 FIGURE 6 Household Debt Outstanding

9. The Levy Economics Institute of Bard College 9 FIGURE 7 Household Borrowing

10. The Levy Economics Institute of Bard College 10 FIGURE 8 U.S. Main Sector Balances under the Assumption of Stabilizing Household Debt

11. The Levy Economics Institute of Bard College 11 FIGURE 9 U.S. Main Sector Balances under the Assumptions of Further Dollar Devaluation and Expansionary Fiscal Policy