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Is the world ready to finance a $1 trillion US current account deficit?

Brad Setser | Dec 16, 2005

Judging from the capital inflow into the US in October, I guess the answer is yes.  And I suspect the US may well give the world a chance to add $ 1 trillion to its dollar portfolio next year. 

That may be a strange thing to argue after the US current account deficit (somewhat unexpectedly) fell in the third quarter.  But the fall reflected a couple of one offs (Katrina related transfer payments, and some more dark matter) that I don't suspect will be sustained. 


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