A world in crisis and out of balance : The magnitude and consequences of some current imbalances in western economies

Abstract

This paper provides a brief overview of the major economic imbalances that the world is facing at the moment, looks at some of their repercussions and possible solutions. The material includes the current financial crisis, both from a banking and fiscal viewpoint, this includes problems with high leverage of financial systems, the divide between the real economy and the financial sector and high debt levels. In addition we look at current account mismatches, the looming demographic and pension crisis, income inequality, North-South disparity, ecological issues and more. The paper looks at selected important countries and regions in more detail than others but most of the analysis is based on the western world, as represented in the OECD. The paper paints a picture of a world that is by many measures very unbalanced and although the imbalances can be successfully addressed there are for the most part no easy solutions.