1950, the United States began to register balance of payments deficits.
At first, the deficits were welcomed, because the United States
strong trade balance
small outflow of private capital
U.S. government believed that the deficits demonstrated US leadership
in providing expanding markets and finance. The US balance of payments
deficits provided $7 billion of an $8.5 billion increase in world
liquidity during the 1950s. The increase in liquidity enabled the
international economy to grow at a record rate.
long could the United States afford huge deficits without harming
its own economy?
if the United States reduced its deficits, who would provide additional
liquidity to allow the world economy to continue growing?