The effects of serious domestic imbalances in large economies inevitably spill-over into the rest of the world. Pettis maintains that “Large persistent trade imbalances, …. are almost always caused by distortions in financial, industrial trade policies.” However, as with Wile E Coyote, gravity, or economic reality, ultimately asserts itself; as Pettis says, “Eventually these imbalances will adjust in spite of policy and institutional constraints, but in this case the adjustment is often violent and can come in the form of a financial crisis.” Since 2008 there have been particular concerns about the large balance of payments surpluses of China ($182 bn. in 2013), South Korea ($89 bn. in 2014) and Germany ($290 bn. in 2014) and the large trade deficits of the United States ($389 bn. in 2014), and the United Kingdom ($173 bn. in 2014).
Large deficits may, for example, imply unsustainable levels of debt and large surpluses may be due to excessive saving levels, low levels of consumer consumption, and non-productive investments. This implies that the global economy needs to be understood as a large complex and integrated system, as changes in one area area inevitably affect other parts of the system. We all now understand that selling sub-prime mortgages to house owners in California, whose income could not support the mortgage repayments, ultimately had an impact on the creditworthiness of New York banks and financial institutions. However, other distortions in the global economic system can also profound effects in unexpected ways. For example, if German wages do not increase in line with productivity gains then German production costs fall, this puts pressure on other Eurozone competitors, and also curbs German domestic consumption. As a result, German imports of goods from the rest of the Eurozone are lower than they would have been if wages (consumption) had been higher, and the German balance of payment surplus increases. This is bad news for the Greeks and other southern Europeans who need to sell to German consumers in order to repay their large debts to German and French banks. As this example shows, it is rare for any financial outcome to be directly caused by a single event or situation. We therefore need to understand the complexities of the global financial system. The attempt of some to blame the Greek financial crisis wholly on the Greeks is to misunderstand the complexities of the problem.
 Pettis, Michael – “The Great Rebalancing”, Princeton University Press, Princeton, 2013, p.11
 Pettis, Michael – “The Great Rebalancing”, Princeton University Press, Princeton, 2013, pp.11-12
Andrew Palmer, 2016, © do not reproduce