> And on balance we experience trade deficits. Why are trade deficits necessarily bad? The trade deficit represents the spread between savings and investment.

> And on balance we experience trade deficits. Why are trade deficits necessarily bad? The trade deficit represents the spread between savings and investment. If net foreign investment in America is very high, then there will be a trade deficit. This is an accounting identity. Household debt as a percentage of GDP has been declining in the US for the past decade. This leads one to believe that the trade deficit currently represents high foreign investment in the US.