redskins44

Chinese investors buy US bonds --> Positive US financial account.

US bonds pays coupons to Chinese investors --> Negative US current account.

Chinese investors sell back US bonds with a profit or loss --> Negative US financial account.


Remember also: balance of payments must be = 0, so US trade deficit, i.e., negative US current account, means positive financial account, ie. some foreign investors are investing in US (using proceeds from the export to the US)



Edited 1 time(s). Last edit at Thursday, May 6, 2010 at 06:59AM by elcfa.