As discussed earlier, no issue is more important than a credible commitment for getting our fiscal house in order, but at a pace that does not forestall a sustained economic recovery. What is needed here is fiscal consolidation that begins slowly, builds over time to substantial magnitude, and is difficult to dismantle – i.e., it requires the commitment of both political parties. The decision of how big the U.S. government should be and what functions it should perform is a political decision that I leave to the voters and our legislators. However, as a nation we need to acknowledge that we must be willing to pay for whatever government services and transfers we want to have. We should not assume that an excess of global savings will always be available to easily finance our public deficits. 5  To be more precise, as of the first quarter of 2011 with statistical discrepancy of 1.2 percentage points attributed to private balance, the figures are as follows: government balance –9.5 percent + 6.3 percent private sector balance equals current account balance of –3.3 percent. BIS central bankers’ speeches  5  The choice of fiscal sustainability is not a political one, it is an economic one and if we do not act voluntarily and preemptively, the market will inevitably force the outcome later – most likely in a much more difficult and messy fashion.
Over the past decade,1 excluding China, the emerging world has grown at a 4.7 percent annual rate – its fastest rate on record. The EME world is, of course, not monolithic. There are the dynamic large economies, EMEs that are broadly complementary to them, and some countries that are both less complementary and less competitive than their peers. Happily, for the most part, EME success is proving mutually reinforcing, as witnessed by growing intra-EME trade. 1  Based on the International Monetary Fund World Economic Outlook database, covering the period 2001 through 2011 (forecasted). BIS central bankers’ speeches  1  As EME output has grown rapidly, their share of the global economy has increased markedly. EMEs now account for 38 percent of global gross domestic product (GDP), up from 23 percent in 1990. And it is the EMEs, not the developed economies, that have been the engine of global growth in recent years. For example, during the 2000s, EME growth accounted for 59 percent of global growth, up from 33 percent and 25 percent, respectively, in the two preceding decades. By other measures, the EMEs have been even more important. For example, EME growth has been very commodity intensive. Thus, while China is still only two-fifths the size of the United States in GDP terms, it dwarfs the United States in terms of its demand for some key commodities. The growth momentum among the EMEs is the result of years of tough choices and sound decisionmaking across the emerging world.