It takes two to tango. This has been one of the twin themes of my recent columns on global current account imbalances (November 24 and December 1 and 8). The huge deficits being run by the US are the mirror image of the surplus savings of the rest of the world. But the dance is becoming ever wilder. That has been my second theme. It is necessary to call a halt before serious injury occurs. The “blame game” among policy-makers is idiotic: they have created the problem together and must solve it together.

The aim is to reduce the rest of the world's reliance on the spillover of excess demand from the US and from a few other high-income countries (particularly the UK, Spain and Australia), while sustaining global economic activity. To achieve this, we need two changes: a reduction in aggregate demand, relative to potential supply, in deficit countries (and offsetting increases in surplus ones); and a depreciation of the real exchange rate in deficit countries, to switch output towards and demand from tradeable goods and services.