2004-3-18
This is Bob Doughty with the VOA Special English Economics
Report.
The United States recently reported a record deficit in its
current account balance. The current account is a measure of the
nation's trade with other countries. Last year, America's combined
deficit on trade in goods, services and other economic activity rose
to almost five-hundred-forty-two-thousand-million dollars. That is
nearly thirteen percent more than the record current account deficit
set in two-thousand-two.
A deficit is often described as a shortage. This is true for the
financial situation of an individual. For example, if you spend more
than your earn, you must borrow from a creditor.
However, economists see deficits differently. When money is taken
away in one place, it becomes a credit someplace else. It all must
balance. This does not mean that deficits are good necessarily. It
just means that a deficit shows that another economic activity is
increasing.
In two-thousand-three, the United States had a huge trade deficit
in goods. It had a moderate trade surplus in services of about
sixty-thousand-million dollars. But, the question remains, how did
the United States pay for everything it bought?
The answer is that the United States paid in dollars. Other
countries, then, accepted those dollars. They could then use the
money to buy American goods, or they could buy American investments.
That is what has happened since the United States developed large
trade deficits in the nineteen-eighties. Countries that trade with
the United States have increasingly invested in it. This foreign
investment is recorded in the nation's financial account.
Last year, other countries invested
five-hundred-seventy-nine-thousand-million dollars more in America
than it invested in them. That investment surplus is greater than
the trade deficit.
Foreign investment has become an important part of economic
development in the United States. In nineteen-ninety-three, foreign
money represented about nine-percent of all investment activity in
America. By two-thousand, that had grown to almost twenty-five
percent.
So does this mean that trade deficits are cancelled out by
foreign investment? The short answer is no. The widest measure of
investment flow in and out of the country is called the capital
account. It shows that the United States has a deficit of
three-thousand-million dollars.
This VOA Special English Economics Report was written by Mario
Ritter. This is Bob Doughty.