As a result, real interest rates would increase, fiscal consolidation would be more difficult, and growth would stall. A third risk is that exchange rates may adjust, but in a disorderly way.
If increasing concerns about the U.S. current account triggered a portfolio shift away from the U.S. dollar, the resulting exchange rate adjustment could overshoot the level required to bring current accounts to sustainable levels. If that occurred, it would likely send shock waves throughout the global financial system, adversely affecting the world economy.