6.3: Balance of Payments
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The balance of payments measures a country’s buying vs. selling in world trade. For instance, China has a trade surplus of $1 trillion/year with the rest of the world, selling more than they buy. The U.S. has been buying more than it sells for almost 50 years, with trade deficits now running about $700 bil/yr or about 6% of its total economy. After the Reagan, Bush 2 and Trump tax cuts for the rich, the U.S. has also run record budget deficits. Although it continues to run these large trade and budget deficits, since the U.S. has a large, stable and prosperous economy, the rest of the world still has faith in the dollar. Everything is relative - the U.S. economy has troubles, but is stronger than Europe and others.