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US Deficit - International Borrowing - Essay Example

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United States has been on the largest net liability position in the world for years due to massive current account deficits. Statistics show that by the end of 2005, US had more than 20% GDP and its overseas claim amounted to over $2.5 trillion…
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US Deficit - International Borrowing
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"US Deficit - International Borrowing"

There is a risk of US facing a disruptive and sudden adjustment of current account which will have probable consequences of dealing with a weaker dollar and slimming down in US expenditure. When a government borrows money from other countries it issues debt unlike individuals who ask from loans from banks (Lader 330). This means that the government puts up for sale treasury profit-making securities like bonds, treasury bills, treasury inflation protected securities and notes to other individuals, local governments, federal governments, states, government from other countries and businesses.
There are number of entities that hold debt for the government of the US, China being on the fore front of the same. Currently, the federal government owes 28 countries around the world debt with 10 of them being the major holders of the share .The amount of debt held by China has increased drastically over the course of the past decade with the current debt reading $1 trillion. Experts say that China has recently decided to slow their pace of lending US money but the amount owed by the same to that nation will remain stable into the years to come. China holds a 25% of the overall US overseas debt and experts believe the numbers are bound to increase (Welch et al 508). Read More
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