Policies abroad and growth abroad also matters and there's little doubt that...our current account would be smaller if some of our large trading partners had economies that were growing faster.

While import growth does not appear to have been the driving force in labor market developments for the U.S. economy as a whole, it’s certainly the case that some industries and some regions have been affected quite significantly by trade.

There is a fundamental congruence between the effects of trade and technology on labor market outcomes. Both can displace workers and force them to make the transition to other sectors. But both ultimately elevate standards of living. Few seriously propose impeding technological progress for the sake of jobs. We should be equally hesitant to impede trade.

I have argued that trade-related job losses are fundamentally no different from job losses arising out of the ongoing turbulence of technological change. It’s hard to see why one set of transitioning workers should be singled out for favorable treatment, except perhaps to reduce political opposition to trade liberalization.

The expected trajectory for this imbalance [in the current account] produces a dramatic deterioration in our net international position and cannot be sustained indefinitely.

Our country is going deeper into debt to pay for consumption instead of investment, and in my view this trend is undesirable and at some point unsustainable. If our current account deficit continues to grow, foreign investors can’t be counted on to keep lending to the United States on the same terms as in the past...These pressures are made even more worrisome because we are using part of the proceeds from borrowing abroad to finance our current account deficit while we are also using part to finance our growing domestic fiscal deficit—the other twin.

Output growth next year should also be helped by a reduction in the drag from net exports. Although exports will be dampened somewhat by moderating growth among our major trading partners, the recent fall in the dollar ought to support export growth and contain imports as well. On the other hand, the declining fiscal policy impetus and the likely downward trend in housing starts will both detract from output growth.

I have outlined several risk factors that could alter the short-term dynamics of the economy - oil prices, the trade balance and the federal budget. The course that these factors take will figure into the precise path the Fed follows.

The currency depreciation that we have experienced of late should eventually help to contain our current account deficit as foreigners export less to the United States.  On the other side of the ledger, the current account should improve as U.S. firms find the export market more receptive.