The Lighter Side of Current-Account Deficits
George Mason University economist Don Boudreaux with his letter to the New York Times on what Obama is talking about when he talks about current account deficits:
You open a report today with this line: "The Obama administration on Friday urged the world's biggest economies to set a numerical limit on their trade imbalances" ("U.S. Proposes Benchmark for Limiting Trade Imbalances," Oct. 22).
Because the concern here obviously is with the U.S current-account deficit – and because a U.S. current-account deficit is simply another name for a U.S. capital-account surplus (that is, a net inflow of capital into the U.S.) – we can translate the opening line of your report to make it more meaningful: "The Obama administration on Friday urged the world's biggest economies to set a numerical limit on the amounts that their citizens invest in the U.S. economy."
I await the White House's explanation for how limitations on investments in the American economy promote Americans' economic well-being.