“Exceedingly unlikely to be indefinitely sustained”

Those are – best I can tell – the words former Treasury Secretary Robert Rubin used to describe the current pattern of global capital flows, one which has allowed the US to finance a current account deficit that Rubin considers “almost unimaginable” in size.

Rubin is the consummate diplomat.    He always chooses his words carefully.   He uses phrases like “the already difficult politics of trade have gotten substantially more difficult.”  But there is an underlying tone of deep concern in his speech at a recent Brooking event.

About the US external deficit and the current pattern of capital flows.  About the elevated (in Rubin’s view) risks to the US outlook.   About low risk premium in almost all financial markets (oil is the exception), when in Rubin’s judgment future risks are likely to be “at least as great” as past risks.   About stagnant real wages for many Americans.  And about the political difficulties combining a domestic policy agenda that helps mitigate some of the insecurities created by increased global competition with political support for continued openness to that competition.