Hat tip to Don Boudreaux for linking to an article by Richard Clarida, former Assistant Secretary of Treasury, wherein Professor Clarida echoes Ben Bernanke's take on the U.S. current account deficit.
It is important to appreciate that the U.S. current account deficit is a general equilibrium phenomenon and is, in part, a reflection of a global excess of saving relative to profitable investment opportunities in the post-bubble world... I note that in a world, like the present, in which there is a global excess supply of saving relative to investment, some country or group of countries must absorb the surplus of internationally mobile capital... I conclude that the United States, because of the role of the dollar as a vehicle currency, because of the depth and breadth of the U.S. financial markets, and because of the credibility of U.S. monetary policy, is destined for some time, as it has been for the last 20 years, to run a structural international capital inflow, and thus a structural current account deficit.
Put Clarida down in the soft landing column:
I expect that over time the U.S. current account deficit will narrow, and certainly hope that this occurs in the context of a growing and prosperous global economy. Indeed, I see no reason to expect that this adjustment will be disorderly.
On China:
I believe that there is a sound case for a revaluation of the currency within the context of the present fixed exchange rate system...A once-off revaluation of the currency, perhaps in conjunction with moving to a wider band and a peg to a basket of currencies, would be an appropriate policy response by the Chinese who have themselves expressed a desire to avoid the overheating of the Chinese economy.
... some degree of gradualism is appropriate in the broader context of China’s effort to shore up the banking system and to deepen and broaden the foreign exchange market. However, a step that could, and I think should, be taken immediately would be to revalue the currency within the context of the present system of capital controls.