Come On In, The Economy's Fine!

My professor Alan Stockman, a leading voice in the economics of international finance, has a brief paper for popular consumption on the confusing subject of the U.S. current account deficit. People who don't know economics think everything should go up: the dollar, the trade balance, the current account, GDP, investment - except a few things they understand, like unemployment and inflation.

As it turns out, there are plenty of things that can go down without hurting America. The dollar is one; and according to Stockman, the current account is another. He argues that the recent large current account and trade balance deficits are caused not by profligate U.S. spending but by a combination of high foreign savings (in Asia and Germany) and good investment opportunities in the U.S.

The paper is online, under the ever-so-accessible title, How I Learned To Stop Worrying and Love the Current Account Deficit. (Note: if you read it, you'll be much better able to understand the specific research project that I am embarking on).