Under What Conditions Could a Country Have a Sizable Deficit

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The Answer is Such has been the case for the United States for many years. The dollar has generally strengthened even though the U.S. has had a current account deficit for years. The deficit should decrease the value of the dollar relative to its trading partners, but investors' financial flows into the U.S. financial markets have, at times, more than offset the glut of dollars into forex markets from the trade deficit. Some of this has been due to the safe haven status of the U.S., some is due to good investment opportunities in real assets in the U.S. and some is due to foreign central banks accumulating dollars to keep their own currency values competitive in order to support their export markets. The extra dollars have typically wound up being invested in the U.S.

Under What Conditions Could a Country Have a Sizable Deficit

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