Publication Date: May 2010
Publisher: National Center for Policy Analysis (U.S.)
Author(s): Robert McTeer
Research Area: Economics; Government; Trade
Keywords: deficits; trade
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.
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