Forex Blog: Currency Trading News & Analysis.

January 23rd 2006

US current account deficit may actually be a surplus

According to recent figures, the US current account deficit (the amount by which net investment exceeds US savings) is on pace to surpass $800 Billion. Moreover, the net value of US foreign assets (US ownership foreign assets minus foreign ownership of US assets) is a whopping -$2.5 Trillion. However, a new report released by two economists suggests the situation is not as dire as it appears. According to the report, despite the negative net US ownership of foreign assets, the US still receives positive net income on its foreign assets. Using back-end calculations, the economists figured the US net overseas investment is actually $700 Billion+. However, even if this number is accepted as truth, the economists warn that if current trends continue, net foreign assets will decline $3 Trillion over the next five years, during which point the USD may have to face the music. The Economist reports:

After making $36.2 billion in 2004, America made just $4 billion on its net foreign assets in the first three quarters of 2005. If it continues on its present trajectory, it will shell out about $190 billion in 2010.

Read More: America’s dark materials

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Posted by Adam Kritzer | in Economic Indicators, US Dollar | No Comments »

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