In an earlier age, the US trade and budget deficits and their international consequences would have been described as a monumental cockup and punished accordingly. Now they are called "global imbalances" that need to be treated gingerly.

The purpose of the euphemism is to suggest that it is not just the US but everyone else who is equally responsible for what, at the end of the day, are the mistakes of the Bush government. Cumulatively, these have resulted in the US current account deficit being 6.4 per cent of GDP in 2005, that is, $805 billion, which is only a little less than China's reserves.

The question now is: should the US be allowed to repay this debt slowly or not? There is only one answer: slowly. Otherwise, everyone will go bust because their dollar holdings will become almost worthless.

No one has greater reason to be worried about these "global imbalances" than the RBI. So it is a good thing that the Governor, Y V Reddy, has spelt out the Indian perspective on these "imbalances".

His message is clear, if not, (given the need to be polite) short. The "global imbalances" are not India's fault because India is not running up huge current account surpluses; it has a market-determined exchange rate; it doesn't depend on export demand to get growth, its savings rate is over 29 per cent, the investment rate is over 30 per cent, and the fiscal deficit is well under control. "India has, thus, been following policies which not only served it well, but have also contributed to global stability."

So? Well, for one thing, says Reddy in a nice glide to third man, "it is necessary for multilateral institutions like IMF to be seen as symmetrical in their analysis of national economies and their relative positions in the global economy." Well tried, sir.

Second, he says, we will do what is good for us, so don't give us advice that we can't accept. This sounds dangerous because, third, he adds, "the contextual challenges for each economy should be given due weight. For example, employment and poverty reduction need to be given highest priority." Is the RBI endorsing fiscal expansionism, then? Breathing life into the dead G in the Keynesian identity? At whose expense?

The statement of sovereignty out of the way, he gets down to the question that is bothering everyone, especially after the way the stock market has tumbled over the past week. "What could be the possible impact of less than orderly adjustment of global imbalances on the Indian economy?"

Here he sounds a warning that is probably directed at the government. "There could be a spill-over effect on domestic interest rates and, thus, on fisc also. The fiscal position of the government could also be indirectly impacted through the nature of management of foreign exchange reserves held by the Reserve Bank." Corporate borrowers and banks will also be affected, of course, but that seems less of a problem.

He then presents a 10-point programme, of which I have space only for five. Starting with the hardest, he says there is a need to ensure that politics is not used to enforce the claims of "the private sector of one country to the public or the private sector of other country." US?

Second, it is important to look at national balance sheets, rather than just the private sector or government ones. The whole can sometimes be much larger than the sum of the parts.

Third, it is necessary to make sure that the surpluses of oil exporting countries are not used excessively in stock markets and real estate. "An interesting issue would be the nature of their responses to unwinding of global imbalances." If they run, what do we do?

Fourth, if domestic prices don't respond even to large exchange rate movements, then what is the point of the dollar depreciating? "The issue is its relationship with other components of the whole package like saving - investment, fiscal deficit, raising investment, structural reforms and domestic output as well as employment. The linkages among the various components described here could be very country specific." In short, what can we do about thriftless Americans?

Fifth, are the markets stupid? How come they can't read the "signals of concern" considering that "analysts in financial intermediaries are sensitive to the downside risk of imbalances but the conduct of the participants does not reflect the awareness"?