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U.S. Account Gap Hits All Time Low

Throughout the year 2013, the United States was still on a very strict diet in regards to economic policy and how the manage the current issues the U.S. faced in the preceding years. With the account deficit on an all-time high, members of government knew we would need to trim the fat, but faced issues concerning where the fat needed to be cut. Despite all of these issues, the U.S. account gap has looked increasingly promising.

The current account gap is measured as the flow of goods, services, and investments which flow in and out of the United States, and has narrowed to just above $81 billion dollars. This has been the smallest this figure has ever been since 1994 when the account gap was about $96 billion. Additionally, the account deficit averaged around 2.3 percent of GDP and was the smallest since 1997. This has been driven by current exports and imports, and analysts expect this number to only decrease with the further with the inventory corrections that still weigh on imports. Imports of petroleum have also continued to decline as the U.S. continues to be less dependent on them and also have been sited as the reason for the reduction in the account gap. US. exports of goods an services have also seen favorable numbers, as in the 4th quarter of 2013, rose 2.5 percent from .7 percent. Lastly, surpluses on net income rose to $64.4 billion from around $59 billion as well as net unilateral transfers decreasing to $31.6 billion from $34 billion. This meaning that foreign money into the United States is not being sent to home countries or places outside of the United States. Money is being spent domestically and as a result we have seen auspicious outcomes.



One Comment

  1. Typos!! – I’m not always sure what you’re saying.

    Before jumping to conclusions about what we ought to do in terms of policy, you first need a model of why the (current?) account deficit is high. Overly strong domestic demand leading to more imports and (perhaps) fewer exports? Unduly weak foreign demand, leading to fewer exports? A (short-term?) shift in energy prices and other imports? A strong dollar due to … list your reasons. Only then can we judge whether we ought to do something, and if so what.

    And why complain? Doesn’t a trade deficit mean foreigners are shipping us goods and in return are accepting pictures of dead US presidents? If fools in China want such pieces of paper, why should we stand in their way?

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