The Global Imbalance In Aggregate Demand Problem

The San Francisco Fed delivered a message on the need to balance aggregate demand in the global economy. The slow US recovery means that the US can not play the role of consumer of last resort. It is time for nations that are running current account surpluses to increase their level of spending to grow global aggregate demand. Some Asian countries, with the exception of China which is heavily investing in infrastructure, can make investments in human resources and infrastructure. Some can shift spending to internal consumption and others can invest in poorer Asian nations. This is also a problem in Europe. Nations running surpluses need to rebalance their economies as well.