This from my friends at GaveKal. Nothing attached, just this paragraph as food for thought. "A 'narrower' US CA Deficit: As we never tire of pointing out, most global trade is denominated in US$ (according to the BIS, the US$ is on one side of 84% of global FX transactions). This means that as global trade expands, the world needs more US$ (e.g., when Petrochina buys oil from Saudi Arabia, the oil is priced in US$, when an Australian investor subscribes to GaveKal Research, that too is priced in US$ etc...). Now the only way the rest of the world can get access to US$ is through selling goods and services to US companies and consumers. Thus, the US current account deficit is the chief means through which US Dollars are disseminated globally. So part of the deal of being the world's reserve currency is a commitment to spend more than one sells abroad. Today, the US still runs a deficit, so on paper the US economy is still exporting dollars to grease the wheels of global trade. Unfortunately, these Dollars are overwhelmingly going to China and to oil producers (see chart p. 2). In turn, this leaves the less productive countries in a bind: not only can they not get their hands on US$, but their competiveness collapses as exchange rates are not allowed to reflect economic realities. In such a bind, central bank reserves tend to shrink (note that, in a second worrying indicator, the growth of central bank reserves ex-China is now negative) until they disappear and the inevitable follows. This is what recently occurred in Belarus (where the currency devalued by 56%) and what may soon occur in Egypt where reserves are falling to a level which will make it hard to defend the Egyptian {ound. In such an environment, one wants to avoid countries with large current account and budget deficits to finance (India? Turkey? France?..."