RL33140
Is the U.S. Trade Deficit Caused by a Global Saving Glut?
June 20, 2007
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Summary
Conventional economic analysis suggests that the cause of the current account deficit is insufficient national saving. Because the U.S. saving rate is too low to finance national demand for physical capital investment, the United States must borrow from abroad to bridge the gap. The conventional policy prescription for reducing the current account deficit has been to boost the national saving rate by reducing the budget deficit and encouraging higher rates of private saving.
