Excellent FT editorial on the US economy

You can find it here. John Gapper of the Financial Times has much good to say.

Today’s imbalance is less industrial than financial. The US has been running a large trade deficit with the rest of the world, importing manufactured goods from Asia and energy from the Middle East. That has created a savings glut in Asia and boosted sovereign wealth funds set up by states such as Abu Dhabi.

The funds are now flowing back in the form of capital investment. In the past, Arab governments mostly put their petrodollars into Treasury bonds but they are now spreading into equity as well. It is a natural financial rebalancing act but it unnerves some politicians and commentators.

…

But what can the US expect if it lives beyond its means in the way it has in recent years? Its consumption patterns and use of energy have turned other countries into its piggy bank. The credit squeeze has left its financial institutions with weakened capital and in need of equity that Arab funds can provide.

If US consumers had saved more, spent less, and filled up their SUVs less frequently – and US financial institutions had not embarked on their own credit binge – they might not be in such an embarrassing condition. But they acted as they did and must live with a weak dollar.