The global economy is undergoing a transition from one era of economic expansion to another. This transition was brought on by the bursting of a bubble in the U.S. housing market. Yet bubbles don’t emerge at random. They are usually caused by an economic event. In this case, the event was the huge flow of liquidity from China to the United States. And, of course, bubbles always eventually burst.

This Deloitte Research report examines how the economic imbalance between the United States and China contributed to the U.S. housing bubble and how the bursting of that bubble is having important consequences for the global economy. More importantly, we offer our view on how the continuation and eventual unwinding of global imbalances will affect the future direction and structure of the global economy. We also examine the future direction of China and the United States, along with the implications for the rest of the world as well as the economic outlook for other major economic players.

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Operating through a network of research professionals, senior consulting and accounting practitioners, academics and technology partners, Deloitte Research delivers innovative, practical insights companies can use to improve their overall business performance. Through its in-depth publications, surveys, reports and commentary, Deloitte Research identifies, analyzes and explains major issues that drive today's business dynamics and shape tomorrow's marketplace.