The Balance of Payments

The, balance, of, payments, tracks, every, transaction, between, a, country's, residents, and, the, rest, of, the, world., By, design,, its, two, main, accounts, always, sum, to, zero., Every, transaction, creates, a, matching, entry., So,, if, one, account, has, a, deficit,, the, other, has, a, surplus.

The, current, account, includes, trade, in, goods, and, services,, income, from, abroad,, and, transfers., The, financial, account,, often, still, called, the, capital, account, in, older, texts,, captures, asset, transactions., This, includes, foreign, direct, investment,, portfolio, investment,, and, changes, in, official, reserves.

Here's, the, core, identity:, A, current, account, deficit, must, be, financed, by, a, financial, account, surplus., When, a, country, imports, more, than, it, exports,, it’s, selling, assets, or, borrowing, from, abroad, to, cover, the, difference., These, are, just, two, ways, of, describing, the, same, reality,, not, two, separate, facts.

Whether, a, current, account, deficit, is, a, problem, really, hinges, on, what, the, financial, inflow, funds., If, it, supports, productive, investment,, the, deficit, can, boost, future, growth., But, if, it, funds, consumption,, the, country, ends, up, with, external, liabilities, without, the, means, to, manage, them.