In: Economics
Why could the world as a whole not experience a problem of a current account balance of payments deficit?
Current account deficit is when payments exceed receipts from trade of goods & services, transfers and net income. It indicates a country is borrowing and is net debtor to rest of the world. A current account deficit is when a country's government, businesses and individuals import more goods, services and capital than it exports.
Consider a hypothetical case where there are only two countries
in the world, there's one country whose payments exceed receipts
from trade of goods & services, transfers and net income, so,
on the other side of the transaction, there's a country which is
earning more than what it spends on trade of goods and
service.
Generalising it to all the countries,in aggregate, there would be
some countries who have advantage in producing some good or have
some mineral which it can export and therefore have a surplus and
on the other hand, some of the countries will have a deficit. Thus,
the world as a whole not experience a problem of a current account
balance of payments deficit.