The current account deficit has been almost eliminated, and the banking crisis contained.

For them, the Chinese current account surplus and its mirror image, the US current account deficit, are the central problem.

Indeed, only those countries that were running large current account deficits before the crisis were affected by it.

The tremendous growth in global current account imbalances magnified problems that led to the financial crisis.

Only a price reduction would create current account surpluses and enable the crisis countries to pay off their foreign debts.

For starters, Latvia, like the other Baltic states, was running an enormous current account deficit when the crisis started.

Meanwhile, the jewel of American capitalism, the financial sector, caused the crisis and is underpinning the US current account deficit.

The cumulative total since the beginning of the first crisis year (2008) means that Spain has financed its entire current account deficit via the printing press.

These countries combined current account deficit matches Germany s surplus almost exactly. (The eurozone s aggregate current account with the rest of the world is balanced.)

As these countries posted current account deficits, northern European countries accumulated current account surpluses, exposing a widening competitiveness gap.

A large current account deficit is a classic symptom of a pre crisis economy living beyond its means in effect, investing more than it is saving.

What makes this perverse is that Germany runs a huge current account surplus.

Germany had a current account surplus of 2.1 of GDP at the time, while Japan s was 4.4 .

Much is made of Germany s large current account surpluses.

Germany now has a current account surplus of about 215 billion a year, while the rest of the eurozone is running a current account deficit of about 140 billion.

An increase in gold imports placed further pressure on the current account balance.

In Spain, the counterpart to the current account deficit was private sector borrowing.

Since a country s current account surplus is the difference between its national saving and its national investment, China s current account surplus is likely to continue to shrink in the coming years.

Countries with large current account deficits and or large fiscal deficits and with large short term foreign currency liabilities have been the most fragile.

Third, the net flow of capital is from emerging markets to the US this is what it means to have current account surpluses in emerging markets and a deficit in the US.

The counterargument hinges on the difference between the current account deficit and the trade deficit.

They argue that current account balances reflect national savings and investment rates.

The world s current account balances must ultimately sum up to zero.

For a few years, imports surged, and by 1995 a sizeable current account deficit had developed.

And with that lower saving rate will come a smaller current account surplus.

The problem of current account imbalances is closely linked to the existence of a world savings glut.

The US current account deficit has been narrowing in recent quarters, thanks to export growth.

SINGAPORE These days everyone seems to want to run a current account surplus.

Germany s enormous current account surplus aggravates their problems further.

On top of this is the almost certain unwinding of global current account imbalances.

An economy s current account is the difference between its investment rate and its savings rate.

Thus, in order to keep the current account deficit stable, the trade deficit must shrink.

The second reason is that nothing has been done to address the problem of current account imbalances.

But, because the fall in import growth had yet to turn into a rout, while China s exports to Europe plummeted, China s current account surplus fell further in GDP terms in 2011.

Perhaps the most notable consequence of Spain s recent reform efforts is its current account surplus the country s first in more than two decades. At the peak of the crisis, Spain s current account deficit amounted to an unprecedented 10 of GDP.

The US unemployment rate has declined to around 7.7 and the current account deficit is close to 500 billion, while eurozone unemployment is at a record high, near 12 , and the current account shows a surplus approaching 100 billion.

China moved to current account convertibility in 1996, but retained a substantial number of controls on capital movements, which have served as a shield against financial contagion.

Since the Vietnam War, US budget deficits, money creation, and current account deficits have often been high.

After all, it was price inflation in the crisis countries, fueled by massive inflows of cheap credit following the introduction of the euro, that resulted in their loss of competitiveness, ballooning current account deficits, and accumulation of enormous foreign debt.

Does Iceland constitute a counter example to Latvia? After all, its GDP fell much less, although it ran similarly large current account deficits before the crisis and ran much larger fiscal deficits for longer.

Much of this rise stems from growing prosperity and current account surpluses in middle income countries.

The US alone ran a current account deficit of 739 billion (5.3 of its GDP).

Countries with large current account deficits (such as Turkey) will remain hostage to skittish market sentiment.

The United States' current account deficit reached 5.7 of GDP in the second quarter of 2004.

The ensuing loss of competitiveness manifested itself in large and growing current account deficits and slowing growth.