Former Bank of England governor Mervyn King is worried about trade imbalances (which arise when a country consistently imports more than it exports, or vice versa). Having fallen in the financial crisis, imbalances have been expanding once more during the recovery. King pins the blame on countries trying to "fix exchange rates at levels that are inconsistent with" balanced trade.
China and the eurozone have been active on this front. The former "has had a large current-account surplus for much of the past 20 years". Although this has fallen from 9.9% of GDP in 2007 to 1.8% last year, "the sheer magnitudes of China's export surplus and its high savings have been enough to start the unprecedented fall in real interest rates". Germany is worse, with a surplus equal to 8.5% of GDP. These distortions have led to the election of a US government that "has set out its stall to reduce the American trade deficit, even to the extent of embracing protectionism".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
‘Inheritance tax insurance’ enquiries are soaring – but is it worth it?Premiums for whole of life insurance can run to £5,000 a month to cover a £300,000 inheritance tax bill, with policies costing more the older you take them out.
-
MPs warn over Lifetime ISAs which could leave savers out of pocketThe Treasury Committee has highlighted confusion around the Lifetime ISA withdrawal charge, which risks consumers losing “a significant part of their savings”
