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Economic Studies, Productivity & Performance Article, US current-account deficit
Article at a glance:

What businesses need to know about the US current-account deficit

  • The US current-account deficit could continue to grow for at least five years.
  • A major depreciation of the dollar could eliminate the deficit during that period, but in fact, such an adjustment would probably be gradual.
  • At any pace, the dollar’s depreciation would trigger significant changes in global trade and savings.
  • Governments, business leaders, and investors should prepare for the potential effects on operations and investment priorities.
This article contains the following exhibits:
  • Exhibit 1: McKinsey Global Institute posited two scenarios with vastly different outcomes for the US current account.
  • Exhibit 2: The returns on foreign assets are higher than payments to overseas investors; the US foreign debt is smaller than the sum of past current-account deficits.
  • Exhibit 3: MGI considered three variations of a major dollar depreciation.
  • Sidebar 1 Exhibit 1: The trade deficit on goods is the largest component of the US current account.
  • Sidebar 1 Exhibit 2: The current account and capital account should mirror each other.
  • Sidebar 2 Exhibit 1: Foreign investors from each region buy different types of US assets.
  • Sidebar 2 Exhibit 2: Asia, Europe, and the oil economies have become the world’s net capital exporters.

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