Sustainable Current-Account Deficits
One way nations spend beyond their means is by incurring debts to the rest of the world. The U.S. current-account deficit indicates that Americans have been consuming in excess of their income by amassing foreign liabilities for more than 15 years. With the situation in Southeast Asia threatening a further deterioration in U.S. international accounts, some might wonder how long we can continue to service rising debts without a sharp hike in interest rates, a rapid depreciation of the dollar, or some other financial market disruption.
Suggested citation: “Sustainable Current-Account Deficits,” Federal Reserve Bank of Cleveland, Economic Trends, no. 98-08, pp. 18-19, 08.01.1998.