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The prediction about the current account deficit of the united states

  1. The US has run chronic current-account deficits for almost two generations.
  2. Share Written by Carmen M.
  3. When saving exceeds investment, the result is a current-account surplus, and the economy becomes a lender to the rest of the world. The missing income must be going somewhere.
  4. The world has long run a substantial deficit in investment income, even though the correct numbers should sum to zero.

On the effects of the globalization of trade in goods and services, the discussion emphasized the costs to domestic employment, wages, and inequality. On the finance side, international capital flows and global imbalances were the primary focus.

Guest Contribution: Is the US Current Account Deficit Problem Over?

And here, the old adage applies: For most of the last four decades, the United States has been a net importer of capital from the rest of the world. From the start of the previous century until the early 1980s, the US seldom recorded a deficit on its external current account see chart. When saving exceeds investment, the result is a current-account surplus, and the economy becomes a lender to the rest of the world. After it emerged as a world power at the end of World War I, the US became a net supplier of capital to the rest of the world.

Working Papers & Publications

Current Account Balances, Actual and Forecast 2017-2022: In 1987, the economist C. Fred Bergsten was among the first to point out that global imbalances had begun to climb toward uncharted territory.

The US, its current-account deficit and the rest of the world

Japan, widely viewed as a developing country only a generation ago, has become by far the largest creditor — and its massive buildup of foreign assets will continue expanding rapidly as far ahead as one can predict. At around the same time, South Korea temporarily emerged as a key culprit behind the US trade deficit.

Analysis of current economic conditions and policy

Watch what has happened to the US middle class since 1970 The same charge has dogged China, which, with its spectacular export-led growth, record official purchases of US assets, and fixed or semi-fixed exchange rate, today continues to dominate discussion of global imbalances. And, indeed, there is some evidence to support claims that currency manipulation and unfair trading practices have been key drivers, at least over some sub-periods.

Furthermore, despite some moderation in the first quarter of this year, private capital flight from China continues. While Germany is singled out on account of its size, it is by no means unique among the advanced economies in maintaining a sizable external surplus.

The U.S. Current Account Deficit: Gradual Correction or Abrupt Adjustment?

So do other Asian economies. The US has run chronic current-account deficits for almost two generations. Pointing the finger at surplus countries is getting old. In the discussion at Jackson Hole, someone asked whether international pressure could be exerted on the surplus countries to spend more and save less.

  1. Share Written by Carmen M.
  2. Watch what has happened to the US middle class since 1970 The same charge has dogged China, which, with its spectacular export-led growth, record official purchases of US assets, and fixed or semi-fixed exchange rate, today continues to dominate discussion of global imbalances. Tax policy has favored debt accumulation by households at the expense of saving, and a significant productivity slowdown is affecting US international competitiveness.
  3. The indebtedness predictions were correct. At around the same time, South Korea temporarily emerged as a key culprit behind the US trade deficit.
  4. I would like to offer a third notion why perhaps it is time to stop worrying about the US current account deficit, an idea that is more speculative. Furthermore, despite some moderation in the first quarter of this year, private capital flight from China continues.

When the same question was put to the US in its era of surpluses at the end of World War II, when the concern was a global shortage of dollars, it was dismissed unequivocally. The US has recorded external surpluses in only three of the 38 years since 1980. Tax policy has favored debt accumulation by households at the expense of saving, and a significant productivity slowdown is affecting US international competitiveness.

  • And here, the old adage applies;
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  • So do other Asian economies;
  • The world has long run a substantial deficit in investment income, even though the correct numbers should sum to zero.

But the fact that it is easy does not make it a good idea. Share Written by Carmen M. ReinhartMinos A.