Exports to Mars?
We are always amused by the attention given to decimal places in various macro-economic measures given the impossibility of their accuracy in the United States, much less in places like China. While we suspect the second derivate of such numbers (i.e. changes in the direction figures are trending) does provide meaningful insights into the underlying situation, an over-focus on one particular time series can certainly lead to a poor map of the terrain.
Economists are constantly urging governments to adopt policies that would reduce global imbalances — which, in crude terms, means that China should slash its current-account surplus and America its deficit. Yet they ignore the biggest imbalance of all: the current-account surplus that planet Earth appears to run with extraterrestrials. In theory, countries’ current-account balances should all sum to zero because one country’s export is another’s import. However, if you add up all countries’ reported current-account transactions (exports minus imports of goods and services, net investment income, workers’ remittances and other transfers), the world exported $331 billion more than it imported in 2010, according to the IMF’s World Economic Outlook. The fund forecasts that the global current-account surplus will rise to almost $700 billion by 2014.
Are aliens buying Louis Vuitton handbags? Are little green men bagging the best sunbeds by the hotel pool? The more down-to-earth explanation is that the global surplus reflects statistical errors. Either the current-account deficits of countries such as America are being understated or the surpluses of countries like China are being overstated, and by a rising amount.