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Lipsey & Chrystal: Economics 11e

Chapter 22

This chapter is about imbalances in international payments, and global payments imbalances are one of the biggest issues facing the world economy today. Case study 2 on page 516 discussed the payments imbalances of China and the USA. The following stories add more recent perspectives on some of these imbalances.
The Economist, March 17, 2007
www.economist.com/finance/displaystory.cfm?story_id=8864359
Financial Times, Wednesday, May 30, 2007
search.ft.com/ftArticle?queryText=The+right+way+to+respond+to+China%27s+exploding+surpluses&y=4&aje=true&x=17&id=070529010616
Financial Times, Wednesday, June 13, 2007
search.ft.com/ftArticle?queryText=Who+are+the+villains+and+the+victims+of+global+capital+flows&y=5&aje=true&x=9&id=070613000051

One implication of global imbalances seems to have been that high saving countries like China have been keeping long-term world interest rates at historically low levels as they have been prepared to lend in abundance in world financial markets.  The following article discusses the fact that this could reverse and mean that long rates and the cost of capital will rise.
Financial Times, Monday, June 18, 2007
search.ft.com/ftArticle?queryText=Surrender+signal%3F+A+fright+in+the+bond+market+may+end+the+cheap+funds+era&y=9&aje=true&x=16&id=070617003720