Economic thought is becoming an oxymoron

If you have been following this morning missive for awhile you know we’ve been expecting export models to be crushed on the major secular theme of global imbalances starting to balance i.e. overconsumption in the West being balanced against overproduction in the East.

Thus, higher savings in the West means lower demand for imports and the specter of positive current account surpluses. The lower exports from the East raises the specter of current account deficits ruling the day (Japan posted its first current‐ account deficit in 13 years in January after exports collapsed) and shrinking that hoard of foreign exchange reserves that were indicative of the East winning all the chips to many. The game is changing.