In essence, Asian central banks are lending the US money on preferential terms which, in turn, can be used by US consumers to buy Asian goods.I attended a number of meetings in Davos where the great and the good of the economics profession debated the US current account deficit, the role of Asian central bank intervention, the absence of domestic demand growth in the eurozone and Japan, and, more broadly, the potential solutions to global economic imbalances. The renminbi was much discussed, but there was a broad acceptance that any currency adjustment that might be tolerated by China would make little real difference to the size of external imbalances.Although there were many calls for the eurozone and Japan to boost domestic demand, the mechanism by which this injection of vigour into their economies was to be achieved was not very well spelt out. Although there was broad agreement as to what the problems were – and some agreement as to what might be the right policy solutions – there was a weary acceptance that, whatever the “right” solutions were, they were unlikely to be pursued.If there was one area where virtually everyone agreed that action was required, it was the ballooning US budget deficit. Some also thought that US real interest rates were too low, contributing to excessive consumer borrowing, aided and abetted by rapid house-price inflation.There was also a belief that the dollar would have to fall further, although there was a lot more disagreement about how far it should fall, against which currencies it should fall and over what time period it should fall. In recent years, the deficit has increasingly been funded by Asian central banks.

Compared with some of the world’s poorest countries, the US also has a significant advantage: it can borrow a lot more and it can borrow at remarkably low interest rates. Furthermore, if it ever found itself wondering how to repay its debts, it could always opt for currency devaluation: given that everyone lends to America in dollars and not in other currencies, the immediate effect of a dollar decline would be to punish the foreign creditors, leaving the domestic debtors with a satisfied smirk on their faces.What I’m referring to is, of course, the current account deficit within the US balance of payments. Whether or not it needs this aid is another matter altogether, but the dependency is most definitely there. For whatever reason, the world’s richest nation has found it difficult to dig deep.One reason for this might well be that the US is more reliant on aid than anyone else. Whether the meetings can come to any meaningful conclusion is, however, another matter altogether. Despite Ms Stone’s efforts and, on a slightly bigger scale, Bill Gates’ wallet, the US has still failed to pledge its 0.7 per cent of income to the needy elsewhere in the world.

If there was an overriding theme from this year’s World Economic Forum, it was a commitment to help the most vulnerable in the world Gordon Brown should be a satisfied man. His plans for an International Finance Facility designed to bridge the gap between the short-term fiscal constraints on rich nations and the immediate economic needs of poor nations are rapidly gaining ground.Meanwhile, more and more European countries are signing up to a key aspect of the Millennium Development Goals (MDG), namely the pledge to devote 0.7 per cent of gross national income per year to foreign development Gerhard Schr? pledged Germany’s contribution on Friday. Without that slug of money, though, it’s difficult to see how the MDG will carry any real credibility. It was all a bit like watching Comic Relief, but with bigger chequebooks and, in Herr Schr?’s case, fewer jokes.All of this suggests that the G7/G8 meetings in London this coming weekend will be busy focusing on poverty and debt relief, leaving discussions about currencies and the like on the sidelines. Hand-wringing, soul-searching, pledge-giving The World Economic Forum at Davos was all of these and more. As a way of extracting promises from governments, companies and individuals, it was an impressive event, even if the majority of those in the audience set upon by a pledge-seeking Sharon Stone looked more embarrassed than inspired

Hand-wringing, soul-searching, pledge-giving The World Economic Forum at Davos was all of these and more. Gone are the days when the pronouncements of Mr Soros would move currency markets.Still, Mr Soros was prepared to give a broad brush view.