Planet Earth's Current-Account Deficit Grows 18%

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By Mark Whitehouse

If you believe the International Monetary Fund's latest figures on global money flows, the planet Earth's trade deficit with the rest of the universe -- or places unknown -- grew sharply in 2011.

This is the conclusion one might draw from the IMF's data on current-account balances, a measure of the difference between countries' spending and income. If, like the U.S., a country spends more than its income -- for example, by buying more goods and services from other countries than it sells to them -- it has a current-account deficit. If, like China, a country exports more than it imports, it has a surplus.

In principle, the deficits and surpluses of all the countries in the world should add up to zero. In practice, they never do. For 2011, the leftover suggests the existence of an unknown sovereign with a current-account surplus of $374 billion, up from $315 billion in 2010 -- an increase of 18 percent. So either the Earth is trading with aliens, or the numbers aren’t quite right.

Extraterrestrial speculation aside, the error has some real-world implications. Official data, for example, suggest China's current account surplus shrank sharply, to $201 billion in 2011 from $305 billion in 2010. This has won the country plaudits from Western officials and analysts, who view the global imbalances reflected in China's surplus as a major threat to the planet's financial and economic security.

But if China's surplus simply went elsewhere, be it to other countries or to the moon, the problem hasn’t eased. In fact, the sum of all the globe's current-account surpluses -- including the phantom one -- came to about $1.96 trillion in 2011, up from $1.82 trillion in 2010. So the imbalances have actually grown a bit.

(Mark Whitehouse is a member of the Bloomberg View editorial board. Follow him on Twitter.)

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-0- Apr/19/2012 13:08 GMT