<P> Developing countries who chose to allow the market to determine their exchange rates would often develop sizeable current account deficits, financed by capital account inflows such as loans and investments, though this often ended in crises when investors lost confidence . The frequency of crises was especially high for developing economies in this era--from 1973 to 1997 emerging economies suffered 57 BoP crises and 21 twin crises . Typically but not always the panic among foreign creditors and investors that preceded the crises in this period was usually triggered by concerns over excess borrowing by the private sector, rather than by a government deficit . For advanced economies, there were 30 BoP crises and 6 banking crises . </P> <P> A turning point was the 1997 Asian BoP Crisis, where unsympathetic responses by western powers caused policy makers in emerging economies to re-assess the wisdom of relying on the free market; by 1999 the developing world as a whole stopped running current account deficits while the U.S. current account deficit began to rise sharply . This new form of imbalance began to develop in part due to the increasing practice of emerging economies, principally China, in pegging their currency against the dollar, rather than allowing the value to freely float . The resulting state of affairs has been referred to as Bretton Woods II . According to Alaistair Chan, "At the heart of the imbalance is China's desire to keep the value of the yuan stable against the dollar . Usually, a rising trade surplus leads to a rising value of the currency . A rising currency would make exports more expensive, imports less so, and push the trade surplus towards balance . China circumvents the process by intervening in exchange markets and keeping the value of the yuan depressed ." According to economics writer Martin Wolf, in the eight years leading up to 2007, "three - quarters of the foreign currency reserves accumulated since the beginning of time have been piled up". In contrast to the changed approach within the emerging economies, US policy makers and economists remained relatively unconcerned about BOP imbalances . In the early to mid-1990s, many free market economists and policy makers such as U.S. Treasury secretary Paul O'Neill and Fed Chairman Alan Greenspan went on record suggesting the growing US deficit was not a major concern . While several emerging economies had intervening to boost their reserves and assist their exporters from the late 1980s, they only began running a net current account surplus after 1999 . This was mirrored in the faster growth for the US current account deficit from the same year, with surpluses, deficits and the associated buildup of reserves by the surplus countries reaching record levels by the early 2000s and growing year by year . Some economists such as Kenneth Rogoff and Maurice Obstfeld began warning that the record imbalances would soon need to be addressed from as early as 2001, joined by Nouriel Roubini in 2004, but it was not until about 2007 that their concerns began to be accepted by the majority of economists . </P> <P> Speaking after the 2009 G - 20 London summit, Gordon Brown announced "the Washington Consensus is over". There is now broad agreement that large imbalances between different countries do matter; for example mainstream U.S. economist C. Fred Bergsten has argued the U.S. deficit and the associated large inbound capital flows into the U.S. was one of the causes of the financial crisis of 2007--2010 . Since the crisis, government intervention in BOP areas such as the imposition of capital controls or foreign exchange market intervention has become more common and in general attracts less disapproval from economists, international institutions like the IMF and other governments . </P> <P> In 2007, when the crises began, the global total of yearly BoP imbalances was $1680 billion . On the credit side, the biggest current account surplus was China with approx . $362 billion, followed by Japan at $213 billion and Germany at £ 185 billion, with oil producing countries such as Saudi Arabia also having large surpluses . On the debit side, the US had the biggest current account deficit at over $1100 billion, with the UK, Spain and Australia together accounting for close to a further $300 billion . </P>

What is the key identity of the balance of payments