>The Perils of Asymmetrical Rebalancing (MORGAN STANLEY)

The worst of the crisis now appears to be over. At least, that’s the collective sigh of relief now evident in financial markets and amongst the broad consensus of politicians and policymakers. However, while the rate of decline in the global economy is, indeed, moderating—not all that surprising after the unprecedented plunge in late 2008 and early 2009—the quality of healing looks dubious. Unfortunately, the world is not coming to grips with the dangerous imbalances that lie at the core of this crisis.

The United States is leading the global adjustment process—with real consumer demand plunging and personal saving on the rise.

China, by contrast, is focusing its stimulus on its two most over-extended sectors—fixed investment and exports—while doing the minimum to provide support for internal private consumption.

For the world as a whole, a pullback in excess demand is being countered by efforts to boost global supply—an ominous asymmetry to rebalancing.

To see full report: ASYMMETRICAL REBALANCING