The chart of current account balances by country aggregates describes graphically a dramatic story of economic virtue and vice, under the shape of pincers with roughly symmetrical jaws corresponding to the achievers of surpluses and of deficits. The former are led by the athletic East Asian economies, the latter by the lavish spenders from North America.

The amplitude of the deviations from the balance has been hugely magnified since the twilight of the 20th century. As from 1998, surpluses took a steep ascending trail, while simultaneously deficits made a big dip. The reversals in 2008-2009 betray the economic consequences of the global financial crisis.

Upon analysis of the annual change rates, the 1998 take-off should not surprise, as it is mainly the result of an exponential growth function. The sums of surpluses and of deficits changed at average annual rates of respectively 9.3% and 12.3% from 1971 until 1997, and 12.1% and 10.5% from 1998 to 2008. Such rates imply doubling size times of 6 to 8 years and produce astounding effects as the basis grows : for some time they remain stuck to the baseline and suddenly appear to skyrocket.

Obviously, since the selected aggregates represent most of the world economy, as deficits grow on one side, surpluses must grow in proportion on the other side. Nevertheless, the speed of the diverging trends raises a deep concern for the world : how wide can the gap grow before the entire world economy crashes on the ground ? The current 2011 economic turbulences are likely the premisses of the crash.

Some remarks on the individual aggregates :

• The Arab World experienced periods of negative current account balances (1983-1989, marked by the Israel war on Lebanon and the Iran-Iraq war, and 1991-1993, the aftermath of the first United States war on Iraq). However, thanks to the oil and gas rent, the years 2000 have allowed this group of countries to achieve massive positive balances.
• The East Asia and Pacific aggregate includes low-income economies, which hinder the performance of the group. Nevertheless, the 1980's "Asian tigers" emergence, followed by the awakening of the currently merchandise exports champion, China, allowed this group to build huge surpluses — that translate largely into vast amounts of degraded US dollars reserves.
• The Europe and Central Asia aggregate includes all European countries, plus Russia and other oil and gas rich Asian countries. Germany with its strong merchandise trade surplus, and Russia, with its vast natural resources, are the principal contributors to the overall surplus of the aggregate.
• The European Union, although including such champions as Germany and the Netherlands and other virtuous economies like Denmark, Belgium or Austria, carries a huge burden from the negative balances of countries like the United Kingdom, France, Italy and Spain. The result is a historical alternation of surpluses and deficits, that in the recent years tends to crystallize in regular and increasingly heavier deficits.
• The Latin America and the Caribbean aggregate has traditionally been on the deficit side. Such heavyweights as Argentina and Venezuela managed to balance their current accounts and to achieve surpluses, but the group performance as a whole is hindered by the deficits of bigger economies like Brazil and Mexico.
• North America includes Canada, the United States and Bermuda. For many decades, Canada has finished the year with a current account deficit. In 2009 it amounted to 38 billion US$ (constant) or 2.9% of its GDP. The real problem is the United States. In 1981 the balance was still positive. President Reagan took care of reverting the course, and since 1982 the trend is definitely down. The only surplus to detract from the trend was achieved in 1991, under President George H. Bush. With Presidents Clinton and George W. Bush, deficits became bigger and bigger and attained the deepest point in 2006, amounting to 803 billion US$ current or 777 billion US$ constant (2005=100). The US current account deficit is currently one of the biggest culprits for the unhealthy status of the world economy.

Sources: World DataBank and BEA.

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