A country's balance of payments records every transaction between its residents and the rest of the world. By construction it balances: a deficit on the current account (trade in goods and services, plus cross-border income and transfers) is mirrored by a surplus on the financial account (net borrowing and asset sales), give or take statistical errors.[1]
The U.S. current account, decomposed
The current-account balance is the sum of three components — the balance on goods & services, the primary-income balance, and the secondary-income balance. The shaded bands below are the three components; the bold line is the current account they sum to. Reading them together shows exactly how the current account and the goods-and-services balance sum out: the trade balance dominates the deficit, while a persistently positive primary-income balance partly offsets it.[2]
The current account and government borrowing — the "twin deficits"
A long-standing question in international economics is whether the current-account deficit co-moves with federal government borrowing — the "twin deficits" hypothesis. The two are plotted together below, both as a share of GDP (negative = deficit).[3]
The series often move together — large federal deficits and large current-account deficits tend to
coincide — but the relationship is far from one-to-one: private saving and investment, the dollar's
reserve role, and the capital inflows shown on the Flow-of-Funds pages all drive a wedge between
them. The current account is the decomposition above; the federal balance is the U.S. Treasury /
OMB series (FRED FYFSGDA188S).
Comparison context (U.K. & Germany)
The same accounting holds elsewhere. As supporting context — not the focus of the site — the United States, the United Kingdom and Germany have run strikingly different external balances: a structural U.S. deficit, a durable German surplus, and a volatile British position, all on a single % of GDP basis.