Current account balances show dramatic shifts

Thursday, April 21, 2005

A comparison of current account balances over the last eight years shows dramatic changes. In shorthand - as I am a little short of time today - the rich nations with their growing service sector industries lost out against the newly industrializing countries that have become the new centers of industrial action. Whereas the US current account deficit (CAD) grew from 120 billion dollars in 1996 to 666 billion in 2004, Asias CAD of 41 billion dollars in 1996 turned into a current account surplus (CAS) of 180 billion dollars in 2004.
Chinas CAS grew from 7 to 55 billion dollars in the reporting period which makes it all the more understandable that they resist any revaluation of their currency.
Even Latin America managed to turn its CAD of 39 billion dollars to a small CAS of 8 billion dollars. Argentina, which recently defaulted on its sovereign debt, saw a shift from a minus 7 billion to a surplus of 3 billion. This of course pales in comparison to the Middle East and Africa, whose CAS skyrocketed from one billion to 116 billion dollars in the said eight years. Don't get fooled though, the lion's share of this surplus went into the vaults of the OPEC countries. Africa remains the poor house of the world although this will change as the continent has most of its commodities wealth still below its soil, waiting to be explored for the benefit of the new industrializing countries.
Overall the so-called industrialized part of the world moved from a CAS of 41 billion to a CAD of 400 billion dollars. The so-called developing nations meanwhile turned their CAD of 90 billion into a healthy surplus of 326 billion.
The statistical discrepancy of 74 billion can be attributed to a lot of unproductive money sloshing around on the wave of capital market moves, seeking ever better rates of return, most of it parked in offshore banking centers. The Caribbean is not exactly known as a conglomeration of industrial powerhouses.
I am calling for a renaming of the world regions. Actually the industrialized nations should be called undeveloping countries as they produce less and less. The nations formerly called "developing" should from now on be called industrializing countries more accurately.
The western world will have to give up its arrogant stance in view of these numbers, having turned into net capital importers. Soon it will be Europe and North America knocking on the doors of governments in the more exotic places, begging for loans, as we spent ours already.


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