McKinsey Quarterly says:
At $857 billion and growing, the US current-account deficit absorbs the vast majority of the world’s capital outflows. To finance this chronic deficit, the United States has amassed trillions of dollars of foreign debt, leaving itself vulnerable to sudden changes in the sentiment of global investors.
A variety of forces, including demographics, technological change, and shifts in consumer demand, could cause the United States to export more and import less. But the further depreciation of the dollar is the most direct correction mechanism—and the most widely anticipated one.1 The uncertainty surrounding such a correction complicates efforts to establish priorities for business investment and government policy.
New research from the McKinsey Global Institute (MGI) offers some guidance. Our findings suggest that the depreciation will most likely be gradual—but would have to be very large to eliminate the deficit. This depreciation would lead to significant changes in the current pattern of world demand and trade.
To read more:
http://www.mckinseyquarterly.com/article_page.aspx?ar=2027&L2=7&L3=10&srid=17&gp=0
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