The American economy is running into a trap. Its jaws are the growing imbalances between outstanding stocks of financial assets and liabilities, and flows interest payments, imports and exports, and consumer spending. It is impossible to predict just how and when the trap will be sprung, but today’s developments ensure that it will snap shut, with potentially damaging consequences. It has happened in Asia, Russia, Mexico and Brazil. The similarities between the US and these earlier examples are clear and troubling.
