It is worth noting that in North America, household consumption is running well over 60 per cent of GDP. As we look ahead, and take into account the aging population, it is important that savings rates increase in North America. At the same time, household consumption in emerging Asia is only about 40 per cent of that region’s GDP.
As Asian incomes rise, there is great potential for household consumption in that region to increase. So these are natural forces that will be working towards the adjustment of these imbalances. The second channel for adjustment will undoubtedly involve changes in real exchange rates; that is, the relative value of currencies taking into account the effects of inflation.