The Ignorant Investor

Ignorance Can't Stand in the Way of My Opinion

Tuesday, March 14, 2006

 

Current Account Deficit Sets New Record

WASHINGTON - America's deficit in the broadest measure of international trade surged to an all-time high of $804.9 billion last year as the country went deeper into debt to foreigners.

The Commerce Department said the deficit in the current account was up 20.4 percent from the previous record of $668.1 billion set in 2004. The current account is the best measure of trade because it tracks not only goods and services but also investment flows between countries.


On my list of phrases that make me nervous, "all-time high" occupies one of the top ten spots. It's right up there gems like, "this time it's different..." and "we don't see any problems going forward...."

But rather than just panicking at the idea of our massive trade deficit, I guess I should be asking what happens when the inevitable rebalancing occurs. So far, I haven't seen a clear answer come out on that question. The options range from "nothing bad" to "mass horror on a biblical scale."

Who to believe? Everyone makes a pretty good case. Perhaps I'll just flip a coin....

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