Economics question: current account deficit

[nicky g]

I keep reading about the dangers posed byt the US current account deficit. WHat is a current account deficit? Is it just a negative balance of payments? Or government debt? Or something more complicated?

[Kurn, son of Mogh]

To my understanding, the current account deficit is the same thing as the trade deficit. More dollars leaving the US to buy goods than dollars coming in.

[Gamblor]

The current account is the net flow of goods, services, and returns on investment, between home country and RoW.

i.e. I import $1 of goods, services and pay out $1 in interest to foreign creditors, and export $2 in goods, services, and receive $2 in interest on my investments in foreign debtors, my C.A. balance is ($1+$1)-($2+$2) = $(2) -> Deficit of $2.

Implications of a deficit include less solvency and greater risk to creditors.

[adios]

The "current account deficit" is the trade deficit plus the United States's net interest and dividend payments to foreign parties. The trade deficit is the net of US exports vs. US imports. The size of the current account deficit is often given as the reason for the fall of the US $ vs. the Euro, Yen, Canadian $, Aussie $ etc. No doubt the US budget deficit has contributed to the increase in the current account deficit. Need somebody to buy all those treasuries and foriegn interests are the main buyers. We've touched on what the value of the US $ should be on the stock market forum. Note wildbill's posts in responses to mine (wildbill is always worth a read).

[nicky g]

Thanks to all for your responses, much appreciated.