In contrast to my early years as a financial journalist, when sterling crises were two a penny, nobody much cares about the current account deficit these days. Yet news last week that it reached a jaw-dropping 7pc in the final quarter of last year was enough to make even the most sanguine of observers sit up and take notice.
It’s a profoundly alarming spectacle, but both the UK budget and the current account deficits seem get markedly worse with each passing, post war, economic cycle. These latest ones are by far the deepest yet.
That they are in any way tolerable is I suppose down to the much more sophisticated nature of global capital markets, which makes funding them a lot easier than it was.
No, it’s because we don’t have either fixed currency rates nor dirty floats. You can manage two of three, just about: currency rates, interest rates and trade balances. You cannot manage three of three. For the third is the tool that must be used to manage the other two.
But if you’re not trying to manage currency rates then you can leave the trade balance alone.