Why is the United States, with the world’s largest economy, borrowing heavily on international capital markets—rather than lending, as would seem more natural?
The U.S. economy appears to be performing well: Output growth has returned to healthy levels, the labour market is firming, and inflation appears to be under control. But, one aspect of U.S. economic performance still evokes concern: the nation’s large and growing current account deficit [negative net exports]. Most forecasters expect the nation’s current account imbalance to decline slowly at best, implying a continued need for foreign credit and a concomitant decline in the U.S. net foreign asset position.