Global imbalances more dangerous than trade war

About 20 years ago, there was one fear above all that kept investors and regulators awake at night: global imbalances.

There was a belief that it kept long-term interest rates low, and hence

contributed to the lax credit conditions that eventually sparked

the Global Financial Crisis.

10-year yields held below the 5% level — and all hell broke out when they finally surged through that landmark in the summer of 2007.

The world now braces for a concerted attempt to deal with imbalances in trade flows

Capital imbalances have accelerated since the GFC, to a far, far greater extent than trade flows.

America’s net international investment position has collapsed.

Incredibly, the deficit is now equivalent to more than 80% of gross domestic product.

The scope for damage to US assets if that money begins to retreat is obvious

Flows out of Europe and into the US have been spectacular in the last year

There’s also the problem that capital can move very, very easily.

With ETFs, you can switch millions out of the US with the press of a button.

It can happen a lot quicker than trade flows can adjust, and America has the most to lose.

John Authers Bloomberg 26 mars 2025

RE: Detta förefaller vara en förklaring till den svaga, på senare tid starka, svenska kronan.

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