What about Those Deficits?

Publication Date: May 2010

Publisher: National Center for Policy Analysis (U.S.)

Author(s): Robert McTeer

Research Area: Economics; Government; Trade

Keywords: deficits; trade

Type: Report

Coverage: United States


Each year, foreign governments and investors increase their holdings of U.S. debt. In effect, they are lending the United States money to finance its excess of imports over exports. However, continued excessive deficits could make U.S. trading partners reluctant to continue the process. Reluctance to buy or efforts to sell dollar holdings by foreign investors would cause U.S. equities to decline, interest rates to spike and the dollar to plunge.