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Globalization and Imbalances in Historical Perspective

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Global imbalances associated with the U.S. current account deficit have given rise to speculation about the nature of the impending adjustment: Will it be smooth and gradual, or will it be sudden and costly? This paper summarizes the two views and then considers three historical periods with similar pressures--an earlier era of globalization from 1870 to 1914, the interwar gold standard, and Bretton Woods. A comparison of the periods and their outcomes suggests current global imbalances might resolve themselves quietly.

Suggested citation: Bordo, Michael D., 2006. "Globalization and Imbalances in Historical Perspective," Federal Reserve Bank of Cleveland, Policy Discussion Paper no. 06-13.

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