U.s. Balance Of Payment Deficit - 1425 Words

Sustainability of U.S. Balance of Payment Deficit The U.S. has been running a trade deficit consistently since the early 1980s. There have been minor recessions from 1980 to 2008. The Great Recession starting as a result of complex financial products, which masked debt risk (McGahey, 2014). The Great Recession was not a result of trade deficit itself. The question naturally arises; can the U.S. maintain trade deficits indefinitely? Overall, Carbaugh argues that there is no economic reason why the United States cannot continue to sustain current account deficits (Carbaugh, 2013). Similarly, Karczmar quoting Herb Stein suggests â€Å"that if the U.S. deficit is a problem, and there is no solution to the problem, then there is no problem† (Karczmar, 2004, p. 9). There are risks in maintaining chronic deficits, however. The focus turns to analyzing if the benefits outweigh the risks, and if not, what can be done to reduce the deficit without negatively impacting the U.S. ec onomy overall. Both Carbaugh, and Karczmar’s risk assessments, options for keeping or reducing the deficit, and impacts of deficit reduction are explored below. Carbaugh explains that the U.S. media and trade unions myopically focus on merchandise trade imbalance while glossing over the fact that services balance has been positive (Carbaugh, 2013). The discussion turns towards services jobs paying less than manufacturing jobs. Jobs that have been created post the recession are lower paying jobsShow MoreRelatedKennedy and the Balance of Payment1258 Words   |  6 Pages Kennedy and the Balance of Payment Assignment 1- FINA6676-2 1/30/2014 Hang Pham- A00366703 â€Æ' What is President Kennedy’s U.S. balance of payment problem? In the 1960s, the United States was experiencing the balance of payment problem when its trade balance was in a substantial deficit, the US dollar was under an attack and a massive amount of gold flew out of its official reserve. 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Moreover, in 2014 trade deficit with China raised by $ 23.9 billion to $ 342.6 billion as U.S. made $2.3 billion to $ 124.0 billionRead MoreThe Japanese Yen Currency System1505 Words   |  7 Pagessafe haven. The Japanese yen has a long history for it is the second oldest major economy in the world. This advanced economy has many peculiar traits, key economic factors, and an interesting political structure that have lead to its current balance of payments, making it th e currency system it is today. The yen has a unique history that began when the currency was established over 100 years age. The New Currency Act of 1871 established the yen as the official unit of currency and moved Japan ontoRead More Exchange Rates Essay2360 Words   |  10 PagesExchange Rates Missing Two Graphs â€Å"For many years it has been believed that if countries import more than they export and so have a deficit on the current account of the balance of payments then their currencies will tend to fall in value. Yet over the last two years the dollar has been a strong currency even though USA has had a record current account deficit. How can this fact be explained? What does it tell us about the factors, which determine exchange rates? What policy decisions with regardRead MoreInternational Economics and U.s. Exports1794 Words   |  8 PagesOutline Balance of Payments Current Account Capital and Financial Accounts International Trade Flows Distribution of U.S. Exports and Imports U.S. Balance of Trade Trend International Trade Issues Events That Increase International Trade Trade Friction Factors Affecting International Trade Flows Impact of Inflation Impact of National Income Impact of Government Policies Impact of Exchange Rates Interaction of Factors Correcting a Balance of Trade