Even shoeshine boys warn about “global imbalances” these days. The truth is that the concept is little understood. In so far as they show up in current accounts, imbalances have actually moderated post-crisis. Time to stop worrying? Not quite. The International Monetary Fund calculates that, as a percentage of global output, the difference between the average current account balances of deficit countries (such as the US, Ireland, UK and Spain) versus surplus countries (such as Japan, China, Germany and oil exporting nations) halved in 2009 compared with the years from 2005 to 2008. That looks comforting. But this readjustment was narrowly focused. Most was due to US consumers saving more in the recession and to falling asset prices. Cheaper oil also helped, both by denting the value of oil exports as well as reducing outflows in deficit countries.

The trouble is that imbalances in China and other Asian surplus countries seem entrenched. At 0.6 per cent of global output, for example, China's current account surplus last year is in line with the average for the past five years. Oil prices are rising. Again, imbalances are not bad per se. If, relative to the rest of the world, China had worse demographics, a lower return on capital, and shallower financial markets, a surplus makes sense. But it does not when there are distortions at work, particularly deliberate ones. To be sure, a lack of social security and an emerging nation mentality about keeping foreign currency nest eggs partly explains China's surplus. But so does its addiction to export-led growth. This requires an artificially low currency that necessitates the build-up of reserves. China's exchange rate policy is unjustifiable. It remains a big impediment to a more balanced world.