Unit 4: Balance of trade around the world

FT Video has a short animation by Martin Wolf explaining why global trade imbalances matter. This is a great introduction to balance of payments. 

Remember, you MUST be quite clear on the difference between a trade surplus or deficit and a government surplus or deficit - which is a classic confusion for a great many. 




You need to understand not only that some countries have vast current account trade surpluses, as shown in this graph from The Economist in 2012, but also that some of those cash mountains are then used to fund buying government debt from countries. 



Challenge: To investigate that issue, I suggest two articles; for the UK, try this in the FT about foreign investors selling UK gilts and the other from CNS News about foreign holdings of US Treasury Bills.