The current account deficit of the United States topped $800 billion in 2005. Ben Bernanke, who recently became chairman of the U.S. Federal Reserve, told a lecture in the spring of last year that the U.S. deficit level is "passively" determined by income, asset prices, interest rates, currency exchange rates and other factors collected from nations around the world. That may be true when one looks at past patterns, but who knows if it will continue to be?
A look at the current situation in the world's major regions may offer a clue to future developments.
In the United States, where people have tended to save less and spend more, the national savings rate plunged into negative territory last year. The Bush administration's plans to cut back on federal spending are likely to face an uphill battle in light of continuing instability in Iraq and other parts of the Middle East, particularly oil-producing nations.