Re: Trade deficits, Current Accounts, and Budget Deficits

From: Sargent (wooji2003_at_163-dot-com.no-spam.invalid)
Date: 03/27/05 

Date: 26 Mar 2005 21:37:36 -0600

> Brablowrote:
Hello all Economists!
>
> Our latest current account deficit is about $666 Billion for '04.
I
> realize that everyone, including myself, was startled and wary
about
> this statistic.
>
> However, according to one study book I'm reading (Schweser Study
> Program for the CFA '04), it states that "There is no negative
> interpretation associated with running a current account deficit.
> Unlike an individual or institution running a budget deficit, a
current
> account deficit simply means that a country imports more than it
> exports. If offset by a surplus in the capital accounts, a deficit
in
> the current account can continute for a long period with no
apparent
> problem."
>
> So relax. There was no reason to be startled.
>
> Here are some questions that I have:
> 1. What are the differences between the trade deficit/surplus and
the
> current account? What were the figures for each of these last
year?
> Correct me if I'm wrong, but I think that the trade deficit was
$666B
> for '04.
> 2. What was our budget deficit for last year?

I think basicly trade deficit is equal to current account deficit,
except for a minor difference, that is, the payments received from
abroad are also accounted in the current account. Usually this
portion is a fairly small one in a country's GDP, hence it is not a
big problem if you say trade deficit is equal to the current account
deficit.
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