Does the subprime crisis bode the long-anticipated unwinding of global imbalances? If consumer confidence deteriorates further, superimposing a decline in personal consumption on the fall in residential fixed investment, American spending will contract. That will include spending on imports. The US current account deficit that is such a familiar feature of the global economic landscape will then be history.

This scenario is not novel. A recession, which is what an abrupt fall in US spending would imply, has long been seen as one way in which global imbalances could be “corrected”. Plenty of commentators see recession as a possible consequence of the subprime crisis.