Introduction:
Since in the 1980’s, one of the most persistent challenges to The United States’ economy and her policy makers has been the deficit of the U.S. current account. A current account is made up of four separate categories, the combined balance of which results in a surplus or deficit. The four categories are: The Merchandise Trade Account, Services, Factor Income, and Unilateral Transfers. Each account either has a surplus or a deficit, depending on whether money is flowing into or out of a particular country. The U.S. Trade Account deficit currently is the largest contributor to the U.S. Current Account deficit. This deficit is comprised of what United States citizens, businesses and government borrow from their foreign counterparts. It seems counter intuitive that one of the wealthiest developed countries in the world would need, or even want, to borrow from its trading partners. This paper will attempt to summarize the reasons for the large U.S. Current Account deficit, whether it is a problem, what can be done to reduce this deficit, and how some investors try to mitigate potential risk associated with a deficit.
The United States Current Account deficit continues to rise as a share of GDP. It reached a record high of 5.7% GDP in the first half of 2005, before declining to an average of 3% GDP by 2011-2012. Although there are many contributors for the 2005 level, many blame the U.S.’s lackluster interest in reducing its budget deficit; specifically, open spending on the War on Terror while proposing tax cuts was likened to fiscal delusion. Consider the following equations:
Current Account ≡ Export – Import and (S – I) + (T – G) ≡ X – M ≡ Current Account
Since both the US government and its citizens ...
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Chart Source:
http://research.stlouisfed.org/fred2/series/BOPBCA
This deficit has to do with having responsible leader who are willing to increase awareness and make beneficial changes in the nation. In my opinion, the federal debt is a serious threat to the US that must be politically address whenever possible. I believe that the candidates of the 2016 presidential election should make this issue one of the top priorities to discuss and to dictate a considerable amount of work to fix it. That is because the worse the federal debt is, the worse the future would be to the nation. Also, voters must be well educated about this issue in order to shape their decision in voting for the candidate that seems most powerful and confident about this problem. Solving this problem may be difficult and would take time and so much effort. Therefore, the changes and solution must be on both a national and individual levels as
Many argue that Reagan “enacted irresponsible tax giveaways for the rich…[starving] the federal government of revenue [which] led to unprecedented deficits.” There is no doubt that “today’s budget deficits [can] impoverish our descendants.”1
From what I have learned so far it appears that contemporary society has responded to the legacies of historical globalization, yet it hasn’t done quite enough to satisfy the concerned and affected. I would have to disagree to this statement, there are still some problems I believe needing to be addressed.
The U.S. trade deficit has risen more or less steadily since 1992. In the second quarter of 2004, the trade deficit relative to GDP surpassed the 5 percent mark for the first time. Many economists already considered trade deficits above 4 percent of GDP dangerously high. The fear is that continued growth in this external imbalance of the U.S. economy will ultimately spook overseas investors. http://www.americanprogress.org/issues/2004/09/b193700.html
The Globalization Reader. 2011. Fourth Edition. Frank J. Lechner and John Boli, eds. Malden MA: Blackwell Publishing.
The US has been in and out of debt countless times throughout history, going as far back as the Civil War. However, debt did not become a truly relevant problem until much later, in the 1980s (Budget Deficits). Up to that point, large budget deficits were generally only allowed during wartime, but this pattern ended after the Great Depression. Roosevelt’s New Deal meant that the government spent much more than it previously did, even after the economy improved (Budget De...
The U.S budget deficit over the years has been a problem but lately the deficit has shrunk. However, what made the U.S budget deficit get to where it is today and what will it be like in the years to come. Throughout the past the U.S has operated under a deficit. This means that the U.S Spent more money than it was taking in. The cause of the excess in spending was different depending on which year. Some of the causes were war, increase in spending , and economic downturns. There were different acts passed to try and control the deficit problem. The deficit at the present time is declining. This decline is due to the improving economy, sequester, and a tax increase on high-income households. The big factor that went into the decline in the deficit for 2013 was the payment that Fannie Mae and Freddie Mac made. The deficit decline in the present time may make some think the U.S could get out of debt but it has been projected that the U.S deficit will start to increase once again.
The United States economy is racing ahead at dangerous speeds, and it may be too late to prevent the return of widespread inflation. Ideally the economy should move ahead gradually and grow at a steady manageable rate. Mae West once stated “Too much of a good thing can be wonderful” and it seems the U.S. Treasury Secretary agrees. The Secretary announced that due to our increasing surplus and booming economy, instead of having an outsized tax cut, we should use the surplus to further pay down the national debt. A tax cut, though most Americans would favor it initially, would prove counter productive. Cutting taxes would over stimulate an already raging economy, and enhance the possibilities of an increase in the rate of inflation. Paying off the national debt would actually help lower interest rates and boost investments, and therefore further increase the wealth of the population, while keeping inflation at bay.
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There are different types of debt, although they all contribute towards the country’s status just the same. One of the most common types of debt Americans have is personal debt. This type of debt is the result of purchasing assets with values that diminish over time. Said assets include: new cars, clothes, furniture, and credit card purchases – short-term pleasures. Investment debt, however, is one of the more acceptable types of debt. This kind of debt results from borrowing to fund companies, education, or even homes – assets that will likely increase in value over time. Of course, both types of debts are equally difficult to repay. Debt ranges from mortgage payments, ca...
Just imagine waking up in squalor, a once prominent society, now a desolate wasteland. All because foreign interest has raped your land of its natural resources and you seen not a cent in profit. Although, globalization is unifying the worlds developed nations and is bringing commerce to nations that have struggle in past years. True, globalization has many positive effects but do the pros outweigh the cons. In this essay I will discuss Globalization ruining the integrity of many countries and also is forcing many undeveloped nations into a bind, and is causing economic distress on some developed nations. Also, due to economic globalization the nations of the world are diluting their culture, sovereignty, natural resources, safety and political system. My goal is not to change your way of thought, but only to enlighten you of the negatives of global economic expansion.
Veldhuis, Neil. “Beyond our means: Government debt tops $1.2-trillion and spending is still rising.” Financial Post. National Post, 16 May 2013. Web. 23 Feb. 2014.
Globalization plays a massive part in my life as it does in everyone’s lives. Every day the world is getting smaller, between technological improvements and peoples interest in these technologies it is easy to see why this is happening. In this essay I have only shortly touch upon some of the places where globalization has affected my everyday life. From shopping as Asda to meeting people on the other side of the world to discuss my dissertation ideas globalization has had a positive affect on my life. The fact that I can walk down a street in Coleraine or Sydney and see similar shops and food outlets is a positive thing in how our lives are intertwined through out the world.