Looking ahead

One factor, according to some economists, is continued revaluation of the Chinese currency, which could eventually balance out the current global imbalances situation. With the American current account deficit around $900 billion on an annual basis, a strengthening Chinese currency could begin to moderate that gross imbalance.

Other economists warn the U.S. economy will eventually have to pay the piper.

“You have to wonder exactly how the U.S. is going to keep current on its interest and dividend payments to the rest of the world,” says Paul Kasriel, director of economic research at Northern Trust Co. in Chicago. He believes the rising levels of government and household debts are worrisome.

“What are we doing with all this capital?” he asks. “Are we pouring it into productive investments that will enable us to grow faster in the future?”

Kasriel concludes Americans are, indirectly, channeling the incoming asset flows from foreign central bank purchases of U.S. denominated securities into “the construction of McMansions and purchasing big screen TVs and SUVs.”