The Importance of Accounting Identity in the Great Rebalancing

Michael Pettis: When a country runs a current account surplus at its most basic level, what exactly does that mean? If there's a mismatch between savings and investment, then they are either exporters or importers of capital. And because the balance of payments is an accounting identity, it must balance to zero. All right, we'll talk to you in a bit about Michael Pettis' Great Rebalancing framework.