Paper Summary:

This paper reviews and discusses the problem and causes of the U.S. current accounts deficit. According to the paper, the U.S. current account tracks the trade balance, income payments and unilateral transfers. The paper reports that the current account deficit now accounts for about seven percent of the GDP. The paper concludes with possible solutions to the problem.

Outline:
Background
The Causes of the U.S. Current Account Deficit
Risks of the U.S. Current Account Deficit
Possible Solutions for the U.S. Current Account Deficit

From the Paper:

"Since 2000, however, the increase in the current account deficit has reflected mostly a decline in public sector saving because of the growing fiscal deficit and even more decline in an already low household savings rate (Rajan, 2005). Beginning in 2001, there has been larger public dis-savings in the U.S. with growing fiscal deficits caused by a weak economy, lower taxes and increased government spending, especially on the Iraq war (The United States current account deficit and world markets). And, personal savings rates in the U.S. have trended down strongly since 1991 and reached an average of only one percent in 2000 (The United States current account deficit and world markets). Personal saving rate in the U.S. are now substantially lower than the rest of the world. For example, they are 13 percent in Japan, 12 percent in Germany, and 15 percent in France. "

Sample of Sources Used:

• Bergsten, C. F. (2007, February 1). The current account deficit and the US economy. http://www.iie.com/publications/papers/paper.cfm?ResearchID=705
• Current account balance - United States. http://www.fxwords.com/c/current-account-balance-united-states.html
• Current account picture (2006, March 14). http://www.epi.org/content.cfm/webfeat_econindicators_capict_20060314
• Free trade debate. http://en.wikipedia.org/wiki/Free_trade_debate#Economic_arguments_for_free_trade
• Rajan, R. (2005, March 15). Global current account imbalances: hard landing or soft landing. http://www.imf.org/external/np/speeches/2005/031505.htm

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