The media and others suggest that the current account deficit run by the U.S. is a problem for the economy. What do you think? What action(s) would you advise federal government officials to take on this issue?
Additional Comments: The current account is equal to the difference between the value of exports and the value of imports (called net exports), plus net factor income (wages, salaries), plus net unilateral transfers(people or companies sending home money).
The component that we are concerned with is Net Exports
When there is a deficit, then more is going out than is coming in. However, as we saw in the textbook and chat, the US has historically attracted financial capital into the US.
What happens when those $ from foreigners are invested here? What happens if they are spent on consumption?
Note: The Current Account Deficit is not the same thing as the US Federal Government's Budget Deficit.© BrainMass Inc. brainmass.com October 9, 2019, 10:38 pm ad1c9bdddf
The United States Government are those executive branch agencies of the federal government of the United States that exist outside of the departments. Established through separate statutes passed by the Congress, each respective statutory grant of authority defines the goals the agency must work towards, as well as what substantive areas, if any, over which it may have the power of rulemaking. These agency rules (or regulations), while in force, have the power of federal law. The 12 Federal Reserve banks provide the financial means to operate the Federal Reserve System. Each reserve bank is organized much like a private corporation so that it can provide the necessary revenue to cover operational expenses and implement the demands of the board. Member banks are privately owned banks that must buy a certain amount of stock in the Reserve Bank within its region to be a member of the Federal Reserve System. This stock "may not be sold, traded, or pledged as security for a loan" and all member banks receive a 6% annual dividend. No stock in any Federal Reserve Bank has ever been sold to the public, to foreigners, or to any non-bank U.S. firm. These member banks must maintain fractional reserves either as vault cash or on account at its Reserve Bank; member banks earn no interest on either of these. The dividends paid by the Federal Reserve Banks to member banks are considered partial compensation for the lack of interest paid on the required reserves. All profit after expenses is returned to the U.S. Treasury or contributed to the surplus capital of the Federal Reserve Banks (and since shares in ownership of the Federal Reserve Banks are redeemable only at par, the nominal "owners" do not benefit from this surplus capital); the Federal Reserve System contributed over $29 billion to the Treasury in 2006.
The Federal Reserve System is an independent government institution that has private aspects. The System is not a private organization and does not operate for the purpose of making a profit. The stocks of the regional Federal Reserve banks are owned by the banks operating within that region and which are part of the system. The System derives its authority and public purpose from the Federal Reserve Act passed by Congress in 1913. As an independent institution, the Federal Reserve System has the authority to act on its own without prior approval from Congress or the President. The members of its Board of Governors are appointed for long, staggered terms, limiting the influence of day-to-day political considerations. The Federal Reserve System's unique structure also provides internal checks and balances, ensuring that its decisions and operations are not dominated by any one part of the system. It also generates revenue independently without need for Congressional funding. Congressional oversight and statutes, which can alter the Fed's responsibilities and control, allow the government to keep the Federal Reserve System in check. Since the System was designed to be independent whilst also remaining within the government of the United States, it is often said to be "independent within the government. The federal government. For depository institutions, they maintain accounts and provide various payment services, including collecting checks, electronically transferring funds, and distributing and receiving currency and coin. For the federal government, the Reserve Banks act as fiscal agents, paying Treasury checks; processing electronic payments; and issuing, transferring, and redeeming U.S. government securities
Federal funds are the reserve ...
This post assesses the current account deficit.