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Current Account Deficit in the United States

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In detail, please explain how great a problem is the current account deficit in the United States? Synthesize the opinions of professionals in the finance industry.

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The response provides you a structured explanation of the effects of US consumers who spend more on imports than US businesses export . It also gives you the relevant references.

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The problem of current account deficit in the United States is very important. The US has a large current account deficit because consumers spend more on imports than US businesses export. To help pay for this trade deficit the US was borrowing 6.1% of its total output each year (according to 2007 figures). To pay for the budget deficit the US government has to borrow from foreign governments central banks. By the end of 2006 the foreign holdings of US Treasury bonds reached $2.13 trillion. Of this, foreigners own more than 40% of treasure debt. Foreign investors also own US assets such a property and company stocks. Way back in 2006 the total figure was $13.6 trillion which was 109% of the GDP for 2005. Can the US pay a ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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