To understand the balance correctly, we should direct our attention to the domestic economy.

NRPLUS MEMBER ARTICLE E arlier this month, we learned that the U.S. trade deficit rose to record levels, soaring at an annual growth rate of 27 percent. Predictably enough, many reporters expressed concern about U.S. dependence on foreign countries. This is nothing new. Journalists have been spinning this same story in the same way for years, confusing their readers and wrapping the trade balance in a shroud of mystery. Why the confusion and mystery concerning America’s negative external balance? After all, the U.S. has run a negative external balance every year since 1975, and the sky has not fallen.

This wrongheaded mercantilist view of international


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