Zen trade

Yves points to a very interesting paper on exactly what a globally balanced world would look like in real terms. The surprise finding is that the biggest beneficiary of all this is Japan. Japan is actually interesting me more and more these days.

The US as a share of the world economy falls by just 4.5% while Japan's rises by 3.3%. The inflexible case, however, requires a much more radical realignment in the relative size of the major economies. The US declines by nearly 30% relative to the world while Japan grows by over 26%. (Combining the numbers, the adjustment would require over a 50% devaluation of the US dollar in terms of the Japanese yen).