Shrinking the “Other” Deficit

CA - 2014-3-20 - Current Account Deficit (historical)If you’re looking for good news, take a look at what economists call the “current account deficit,” which is a way of measuring the flow of goods and services into and out of the country.  As you can see from the accompanying chart, up until around 1980, Americans tended to sell more products and services to the rest of the world than they were purchasing.  Since then, dollars have been flowing out of the country at rates ranging from troubling to alarming–and in the run up to the recession, as the chart shows, Americans were buying so much more from the world than they were selling out to it that the difference amounted to more than 5% of the total U.S. economy.

But the trend has been positive lately.  Last year the deficit ran to just 2.3% of GDP, the lowest level since 1997, and it looks like the economy is starting to get back in balance with our global competitors. Part of the story is a reduction in petroleum imports–a trend which economists expect to continue. Also contributing is a small decrease in humanitarian aid flowing out of the U.S., from $34 billion down to $31.6 billion–which still represents more than a third of the $81.1 billion total.

Perhaps the most interesting component is services; last year, American businesses and consultants sold $57.92 billion more in services to the outside world than were purchased by Americans.  This suggests that in an increasingly knowledge-based economy, our country is well-positioned, even against countries that live or die by export surpluses, like Japan and China.

Sources:

http://www.reuters.com/article/2014/03/19/usa-economy-currentaccount-idUSL2N0MG0MY20140319

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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