Is the Current-Account Deficit Sustainable?

In 1987, after six straight years of large current-account deficits, the United States became a net debtor country. Our deficits have since persisted and our debts have grown—today we owe more than any other country—but the dire consequences predicted by some analysts have not materialized. Old concerns are now reemerging as Asian and Russian financial crises push the U.S. currentaccount deficit to new record levels. It reached $220 billion (annual rate) over the first three quarters of 1998, raising our debts to more than 17 percent of GDP. How long can we continue to service our growing international indebtedness without a sharp hike in U.S. interest rates, a rapid depreciation of the dollar, or some other economic disruption?