Paul Krugman shortens the odds on a double-dip recession in the US. While I agree with Krugman on a lot of things, I tend to give more credence to the Schumpeterian idea that in an economy bloated with excess, recession is unavoidable. The obvious imbalance in the US economy is the huge current account deficit, now near 5 per cent of GDP. It’s hard to see how this can be maintained for long, and also hard to see how it can be reduced without a recession. Of course, this is relevant to other chronic deficit countries like Australia.