As individuals in these countries are increasingly drawn to investing at home and consuming more of their wealth and as their real wages catch up to past productivity gains, the upward pressures on these countries’ currencies will intensify, their demand will come into better alignment with their capacity to produce, cost advantages will decline, and these economies will exert less, if any, downward pressure on inflation in the United States or other advanced economies.
Global imbalances The first thing to keep in mind about global imbalances is their scale. The U.S. current account deficit is enormous - on the order of $ billion or 6-1/2 percent of gross domestic product - and it is not likely to shrink substantially in the immediate future, given the current configuration of economic activity and prices around the world.