U.S. Current Account Deficit Harvard Case Solution & Analysis

Investors and politicians around the world are faced with the risk of painful economic consequences arising from the large U.S. current account deficit. In 2007, the U.S. current account deficit was $ 731 billion, equivalent to 5.3% of GDP. Lack of sufficient discussed with intensity. On the one hand, it was noted that a large deficit in the long run reduce smoothly, even if they last for many years. Former Federal Reserve Chairman Alan Greenspan was one of those who expect "benign resolution to the U.S. current account imbalance." Other analysts, such as the World Bank economists, believes that the large deficit increases the risk of a sharp and disorderly fall of the dollar, and that the necessary macroeconomic adjustments that can be painful for the United States, and for the rest of the world. The Financial Times said: "How long will the foreigners will be willing to make such generous" gifts "in the U.S.?" In this environment, Berkshire Hathaway, run by legendary investor Warren Buffett, has suggested that current account imbalances will lead to "some chaotic markets in which the adjustment to play the role of" shareholders and announced plans to increase investments in foreign companies to protect against this risk. She still could not see that in the short and long term effects of the current account deficit will eventually give way. "Hide
by Laura Alfaro, Rafael Di Tella, Ingrid Vogel, Rene Kim, Matthew Johnson Source: HBS Premier Case Collection 33 pages. Publication Date: July 6, 2005. Prod. #: 706002-PDF-ENG

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U.S. Current Account Deficit

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