The U.S. Current Account and its Risks

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來自 IE Business School 的課程

Business Opportunities and Risks in a Globalized Economy

個評分

IE Business School

Business Opportunities and Risks in a Globalized Economy

個評分

課程 3（共 3 門，Specialization Globalization, Economic Growth and Stability）

This is the last of the three courses part of the Globalization, Economic Growth and Stability Specialization.¨Business Opportunities and Risks in a Globalized World¨ is the the 3rd and final course of the ¨Globalization, Economic Growth and Stability¨ Specialization taught by IE Business School's Professor Gayle Allard. This course is designed to help an investor, businessperson or economist approach macroeconomic, institutional and international data and derive information from the indicators that point to the types of opportunities and risks that they present. Students will gain practice by handling the data of some of the largest economies in the world –the United States, Japan, the European Union, China and India—and “reading the story” of their economies from their data, yielding surprisingly profound conclusions about their present and future. The course is the third in a series for the specialization but it is also a stand-alone course for anyone who wants practice in practical macroeconomics. This course includes 4 modules, each one deep-diving into the macroeconomic circumstances that have been brought up in the recent history of four key regions: the USA, Japan, Europe, and China and India. Students will analyze the ways in which international economies relate with one another, the benefits of trade and migration and economic development and how it occurs, among other themes. Professor Allard takes overarching macroeconomic theory and turns it into a practical tool for those interested in the opportunities and risks of investment and doing business in each of the four regions covered.

從本節課中

The USA: GDP, Inflation and Unemployment; Growth and Gaps: Reviewing the Basic Relationships.

The US economy is not only the world´s largest, but also one of the most free-market developed economies; and its data is abundant and excellent. It provides an ideal opportunity for students to review the basic macroeconomic and policy variables and relationships, and to identify these or detect their absence in the real world. In the process, they can make the first steps toward determining how “normal” or especially good situations provide business opportunities and how departures from the rules point up situations that are risky for businesses operating in that country.

Fiscal Indicators and the U.S. Business Cycle6:40

Does the U.S. Have a Public Debt Problem?5:21

Monetary Policy in the United States4:54

The U.S. Current Account and its Risks5:27

Ease of Doing Business and U.S. Inequality3:43

Risks and Opportunities for Investors in the U.S.4:27

與講師見面

Gayle Allard
Professor
Economics

In the second course in this series,

trade, migration, and exchange rates in a globalized world,

the globalization course, we might call it,

we talked about current accounts and we talked about what they tell you about a country.

So let's turn to the US current account and see what we can

learn about the US economy just by looking at this indicator,

again, letting the indicators tell us

a story about the country and its risks and opportunities.

So, here we have the current account balance in the United States.

Now, the current account is mainly the trade account,

mainly exports minus imports,

but it's got some other things, primary and secondary income.

And so, we find that the United States is a current account deficit country,

and it's a chronic current account deficit country.

Actually, the deficits began in the 1980s.

And you see the deficits got very large.

Before the crisis, they were a little bit smaller now.

That has to do with more US production of petroleum in particular.

But anyway, we see it as a chronic current account deficit country.

Now, what do we know about the United States if

we know that it has a chronic current account deficit?

There are big differences between

current account deficit and current account surplus countries.

And when we explore India and China later on,

or we explore Japan,

we're going to dig into these differences more.

But let's just explore what those current account deficits,

those chronic current account deficits tell us about the US economy.

Well, first of all, it tells us that the United States consumes more than it produces.

I call these countries big spenders in the globalization course.

They produce a certain GDP,

they consume it all,

and then they still have demand,

and they buy goods from other countries.

So, United States is a big consumer,

they consume more than they produce.

At the same time,

they can drive their own growth with domestic demand.

If the rest of the world went into crisis,

the United States would still be able to grow fairly well because domestic demand is big,

it's robust, it consumes the entire GDP and then some.

The dark side of the US deficits,

current account deficits now,

these are not fiscal current account deficits,

is that the United States need to borrow abroad in order to finance that deficit.

In other words, what's happening is,

it is importing, for instance,

more than it's exporting,

so the difference that it can't cover the things it can't pay for with its own exports.

It needs to borrow the money from foreign countries in order to pay for that.

This would go in. As you know from the previous course,

this would show up as a surplus on the financial account.

But the US does have that vulnerability to the willingness of other countries to

lend the money to finance their excess consumption at reasonable rates,

and this is a potential risk.

And their currencies, the currencies of current account deficit countries,

tend to fall as the deficit grows.

Now, the United States is a special currency because it's also

a reserve currency as we mentioned in the globalization course.

So that tends to keep it strong,

but there would be a tendency for the dollar to

depreciate because of the current account deficit.

So we see risks here for the United States,

risks for the United States itself,

as it has to borrow money from other countries even though they're happy to lend,

risks for the other countries that lend it money because they are then

exposed to the credit worthiness of the United States and the value of the dollar.

I'm showing you on this chart a picture of what the world looked

like in terms of current account deficits and surpluses in the period up to 2012,

and we looked at the same chart in the globalization course.

But you can see over here on the left,

where I have the big spenders,

you'll find the United States as a country

where the deficits are relatively large percent of GDP.

You also find Spain, Portugal, Greece,

Ireland, Iceland, the UK,

many of the countries that experienced real trouble in the financial crisis.

And this is a consequence of that growing debt.

As they borrow year after year from the rest of the world,

their debt gets bigger and bigger and bigger and at some point,

we never know exactly where it will be.

At some point, their system could become

unstable and the financial sector could experience a crisis.

So the United States,

as a current account deficit country,

is vulnerable to this kind of a dynamic.

On the other hand, for the rest of the world,

this tendency of the United States to consume more than it

produces is a very welcome source of the excess demand for them.

Here in this picture, you can see the biggest current account deficit countries.

In here, I'm showing their deficits as a percent,

excuse me, in absolute numbers in US dollars, here over on the side.

And then you've got the surplus countries with

their surpluses in absolute numbers US dollars on the other side.

Obviously, one has to compensate for the other.

So if these countries,

including Japan, China, Germany,

are going to have big surpluses,

somebody has to have a big deficit.

So the United States steps into there,

providing 400 billion or more in excess demand to the global economy,

and it's something that the global economy relies on for its growth.

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