The current account deficit is not synonymous with debt

From Cafe Hayek:

This time, it is none other than the New York Times displaying ignorance. Alas, the article is no longer freely available. Don Boudreaux does the honor of correcting the record.

It bears repeating again and again: a current-account deficit is not synonymous with debt. Nor are all dollars that foreigners do not spend on U.S. goods and services loaned to Americans. Many of these dollars are

- held as cash reserves

- used to purchase American real estate

- used to purchase shares in American corporations

- used to create, maintain, and expand foreign-owned firms located in the U.S.

Gotta love it. Faithful readers will recall that goofy reporting on the value of the dollar is one of my pet peeves. Goofy reporting on the trade deficit is right up there on my list, and usually related to the former.

Boudreaux does a really nice job of smashing the myth with his post.