U.S. Federal Reserve Chairman Ben Bernanke warned on Monday that pursuit of export-led growth by Asian nations could lead to a reemergence of global trade imbalances and undercut efforts to achieve more durable growth.
Throwing his weight behind a call by the Group of 20 nations to rebalance the global economy, Bernanke said Asian nations should put in place policies that discourage excess saving and boost consumption.
At the same time, he said the United States needed to increase its saving and "substantially reduce federal deficits over time."
"To achieve more balanced and durable economic growth and to reduce the risks of financial instability, we must avoid ever-increasing and unsustainable imbalances in trade and capital flows," Bernanke said at a conference on Asia sponsored by the San Francisco Federal Reserve Bank.
Bernanke said that while trade imbalances had started to narrow as U.S. households ramped up saving in response to a deep recession eating at their wealth, he cautioned that the imbalances may begin to grow anew as the global economy recovers and trade volumes rebound.
"Trade surpluses achieved through policies that artificially enhance incentives for domestic saving and the production of export goods distort the mix of domestic industries and the allocation of resources, resulting in an economy that is less able to meet the needs of its own citizens in the longer term," he said.
http://money.cnn.com/2009/10/19/news...ion=2009101914
See the thread Understanding world economy global imbalances versus internal inequalities
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