Data Suggests Strong Rebound in Asia, Bernake Says

Source: Luca Di Leo
Written by: Stephani Williams

In an recent speech in Santa Barbara, California, Federal Reserve Chairmen Ben Barnake said that Asian countries seem to be leading the world in economic recovery and currently focusing on getting consumers to spend. Recent data shows that there is a strong rebound underway in Asia. The Fed Chairmen said " At this point, while risks to economic outlook certainly remain, Asia appears to be leading the global economic recovery."
Among other risks, Barnake blamed the imbalances partly for the recent financial crisis. In which, for example, Asia relied to heavily on exports for economic growth, while the United States has relied too much on spending. "To achieve more balanced and durable economic growth and to reduce the risks of financial instability, we must avoid ever-increasing and unsustainable imbalances in trade and capital flows," Bernake said. Also in the conference, Barnake presented the point the United States has a difficult fiscal situation: "We need to develop a fiscal exit strategy which will involved a trajectory towards a sustainability....that it is critically important to maintain confidence in our economy and confidence in our currency." The value of the dollar against other major currencies has declined because of U.S. interest rates are staying and approaching close to zero, in effort to to fight the economic downturn.
However, as the world's economy recovers , the global imbalances may "reassert themselves" THEREFORE, THE U.S. HAS BEEN CALLED TO INCREASE ITS NATIONAL SAVINGS RATE.

"Although we should deploy, as best as we can, tools to increase private saving, the most effective way to accomplish this goal is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time."

I would like to know what that fiscal trajectory goal is?
It would mean shifting to more savings in debtor countries such as the UNITED STATES, and more consumption in China and other major emerging countries and economies.
China has long said that it is gradually moving its economy toward a more consumption-based model, but that it will take time to make the transition away from a dependence on exports.
Rather than global imbalances, China blames the financial crisis largely on a lack of supervision and the risky use of debt in developed countries.