My experience is that exchange markets have become so efficient that virtually all relevant information is embedded almost instantaneously in exchange rates to the point that anticipating movements in major currencies is rarely possible.1 I plan this morning to head in what I hope will be a more fruitful direction by addressing the evolving international payments imbalance of the United States and its effect on Europe and the rest of the world.
Figure 1 Selected Economic Indicators 2001  2002  2003  2004  Real GDP Growth (%)  4.3  6.8  13.2  6.2  Energy Sector (%)  5.6  13.5  31.2  10.5  Non-Energy Sector (%)  2.8  3.4  3.8  2.9  Inflation: annual average (%) end of period  5.5 3.2  4.2 4.3  3.8 3.0  3.7r 5.6  Unemployment Rate (%)  10.8  10.4  10.5  8.6*  Fiscal Balance  -0.1  0.3  1.4  2.1r  External Current Account Balance  4.7  0.6  9.3  13.0  Central Government External Debt  17.7  17.7  15.0  13.1  Central Government Domestic Debt  18.7  19.6  15.8  15.9  1,585.5  1,907.4  2,241.9  2,975.5  In per cent of GDP  Net Official Reserves $  First, on the screen you can see a snapshot of the evolution of the main macroeconomic indicators over the past four years.