The Surplus Side of Deficits

You can go the distance
We'll find out
In the long run
--Eagles

Which would you rather have: a trade deficit or a foreign investment surplus? Turns out this isn't an either/or question.

As we have noted, when you buy goods from someone else with cash, that someone else has to invest that cash.

While timing may be off a bit (holders of cash may wait a while before investing), trade deficits and investment surpluses must balance.