I have heard that country trade deficits are primarily driven by excessive consumer spending and large public deficits, and that having the world's reserve currency means that you will have to run large trade deficits. How much of these claims actually true and supported by evidence?

  • $\begingroup$ You are actually asking two questions. On the first, another driver of trade and current account deficits may be higher investment than saving. On the second, the argument is that foreigners want reserve assets (i.e. your currency or something equivalent), and they can only acquire it by selling more to you than you sell to them. $\endgroup$
    – Henry
    May 11, 2019 at 18:09


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