Might the United States continue to run large current account deficits?
David Gruen and Jason Harris1 It is often argued that the United States cannot continue for long to run current account deficits of their current size of 5percent of Gross Domestic Product (GDP). This article questions this conventional wisdom by examining the implications were the United States to continue to run current account deficits of 5percent of GDP for the next ten years. It suggests: • Despite the size of the United States, the asset-composition of the wealth portfolio of the average non-United States citizen would need to change by less than might be anticipated. • The risk premium on United States assets might remain quite small. • The most serious risk to the medium term outlook for the United States is a continuation of large fiscal deficits, not large current account deficits, per se.
