What is the "current account"?

in a basic sense, its exports - imports....so, if its negative, then you are importing more than exporting...and you need to finance that deficit.

• deficit:   more aggregate spending than output.    to get rid of a deficit...need to reduce aggregate spending in relation to output
• a surplus is = more savings, than investment.

example: 

• if China were to slow down, and export less...but to import even less...than they would have larger trade surplus. As Brad Setser explained here "A slowing global economy would hurt China’s exports, but in this scenario China would slow more than the world. That means China’s imports would fall more than its exports. China’s trade surplus would rise. But, you might say, the current account surplus is determined by the gap between savings and investment. Why would that change in a slowdown? Simple. China’s slowdown reflects a fall in investment (especially in new buildings and the like). Less investment and the same level of savings means a bigger current account surplus"

Balance of Payments....must BALANCE

• if you have capital inflow...then you can run current account deficits....but if foreign capital stops flowing in....then you MUST end the deficit...which can be very painful......because aggregate spending MUST drop in relation to output.
• The price of tradeables must rise in relation to non-tradeables...
• so, there needs to be a REAL depreciation of the currency (a rise in prices of exports (tradeables) vs non tradeables (haircuts, ex)).
• see balance of payments

Borrowing from abroad:

the total amount the US borrows from the world is defined by the current account deficit

"Remember this the next time someone argues that the US will be borrowing more from the rest of the world to finance its fiscal deficit: the total amount the US borrows from the world is defined by the current account deficit and the current account deficit clearly went down in the fourth quarter even as the US fiscal deficit (and the Treasury’s borrowing need) soared. That is because the rise in government borrowing offset a contraction in private investment and a rise in private savings."  Brad Setser blog

Trade deficit vs current account deficit:

see trade deficit

Current Account Balance - country by country

source: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html

Note that the USA is at the dead bottom of this list.  But, if you look harder, you find rich countries at the top, and at the bottom, but poor ones in the middle.  Is this a real trend?  What do you think are the causes of this trend?  the consequences?