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US Current account deficit at new record

September 15, 2004
The US Current account deficit reached a new record high of $166,2 billion or 5,7% of GDP in the second quarter this year. Except for maybe Australia this is the by far highest in the industrialized world. In fact many other rich countries like Japan, Germany and Sweden are recording record surpluses. This record deficit reflects a combination of near record low houshold savings, a rising budget deficit and a recovery in investments. One interesting aspect is that foreign (Asian) central banks covered nearly half of the deficit by buying US assets (nearly all government bonds) for $73,9 billion. In the first quarter they bought US assets for a whopping $127,9 billion, nearly enough to cover the entire CA deficit of $147,2 billion.

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