How much a country owes vs. how much it is owed

The account balance in the U.S. is released during the second week of every month, and it gives an indication of how much the United States owes vs. how much the U.S. is owed. The account balance is a high-profile market indicator, and the U.S. figure is often compared to that of other countries. However, most traders know little about how it is actually calculated, or its value in judging the strength of a country’s economy.

According to the Bureau of Economic Analysis (http://www.bea.gov), the U.S. agency that calculates and tracks account balance, the account balance includes “trade in goods and services, receipts and payments of income, current and capital transfers, and transactions in U.S.-owned and foreign- owned assets.” Goods are anything tangible that can be moved across borders. Goods that leave a country are marked as a credit, while those that come in are recorded as debits.

Goods such as grains or dairy products, which the U.S. produces in large quantities, would provide a large credit for the U.S. On the other hand, the U.S. incurs a debit when it buys oil or electronics from other countries. Services are recorded the same way. An example of a service would be if the U.S. were to provide consulting to a foreign country. The price the foreign country paid would be considered a credit for the U.S. Income ranges from employees working in one country but earning a salary from a company in another country to direct investments in other countries.

The U.S. account deficit has increased in no small part because the U.S. has a greater amount of foreign investment than foreign companies investing in the U.S.
Current transfers are one-way transactions, such as an aid package to a company recovering from a national disaster. They are generally a small percentage of account balance and are mostly ignored when measuring the strength of an economy.