<p>The US borrows in its own currency. So it can always issue new currency to repurchase its own debt. And it mostly trades in its own currency, so when its currency gets devalued against the currencies of its trading partners, the trade imbalance is corrected.</p>

<p>Argentina borrows in someone else's currency - the US dollar. So it cannot issue new currency to repurchase its own debt. Furthermore, its international trade is largely denominated in other currencies than its own, too, so devaluing the Argentinian Peso does not correct the trade imbalance.</p>

CC BY-SA 3.0
2016-08-19T11:36:54.777Z
That's exactly was about to ask in a commentary. Can US issue new currency without any negative consequences? In other countries creating new currency with no backup in dollars generates in inflation
Pablo
CC BY-SA 3.0
2016-08-19T11:42:51.117Z
@Pablo it's a one-off inflationary stimulus, and *ceteris paribus* will lead to a fall in the value of the currency, so will help correct the trade imbalance.
410 gone
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2016-08-19T11:50:16.030Z
so, if US has to create new currency to compensate 541.000 millions of euros of deficit (last year), sometimes over a trillion of deficit yearly, how is that the dollar doesnt devaluate and more or less keep its value? or is it all years devaluating?
Pablo
CC BY-SA 3.0
2016-08-19T11:53:19.873Z
@Pablo rather than asking new questions in comments, please do post them as new questions, where everyone can benefit, and you'll get more - and better - answers
410 gone
CC BY-SA 3.0
2016-08-19T09:23:51.310Z
2016-08-19T09:45:52.620Z
2016-08-19T09:45:52.620Z
410 gone
<p>Persistent trade or balance of payments deficits generate debt and other liabilities, either in the currency of the importer or in some foreign currency.  This may be sustainable so long as lenders expect to be repaid in something of value.</p>

<p>The United States borrows in dollars, and the general expectation among its creditors is that its debts will be honoured (there was some doubt in <a href="https://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis_of_2011" rel="nofollow">2011</a> and <a href="https://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis_of_2013" rel="nofollow">2013</a>) and that others will accept dollars in the future.</p>

<p>For Argentina, this expectation is much weaker.  In the past there have been defaults on borrowing in dollars (eight times since 1824, most recently in 2001 and 2014).  Alternatively, Argentina could borrow in pesos, but there have been frequent <a href="https://en.wikipedia.org/wiki/Argentine_peso" rel="nofollow">bouts of hyperinflation</a>, which makes foreign lenders reluctant to lend. </p>

<p>So for the United States, its historical behaviour has created a degree of trust among its creditors which allows a sustained deficit.  Argentina's history makes it harder to borrow, so any new suggestion of a persistent deficit means it soon finds financing imports more difficult, thus creating a crisis.  </p>

CC BY-SA 3.0
2016-08-19T09:07:16.817Z
2016-08-19T09:07:16.817Z
Henry
<p>why in some countries (e.g. Argentina) trade deficits for a few years generates economical crisis and collapse and in United States 40 years of deficit havent? Which are the economical effects in both countries and why they are different?</p>

<balance-of-trade>
why in some countries trade deficits for a few years generates economical crisis and in United States 40 years of deficit hasnt?
Pablo
# why in some countries trade deficits for a few years generates economical crisis and in United States 40 years of deficit hasnt?

(Asked by: username_0 on 2016-08-19)

why in some countries (e.g. Argentina) trade deficits for a few years generates economical crisis and collapse and in United States 40 years of deficit havent? Which are the economical effects in both countries and why they are different?

**Tags:** balance-of-trade


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## 2 answers

### Answer by username_1 on 2016-08-19. Score: 1 | Accepted answer

The US borrows in its own currency. So it can always issue new currency to repurchase its own debt. And it mostly trades in its own currency, so when its currency gets devalued against the currencies of its trading partners, the trade imbalance is corrected.

Argentina borrows in someone else's currency - the US dollar. So it cannot issue new currency to repurchase its own debt. Furthermore, its international trade is largely denominated in other currencies than its own, too, so devaluing the Argentinian Peso does not correct the trade imbalance.

> **Comments:**
> **username_0**: That's exactly was about to ask in a commentary. Can US issue new currency without any negative consequences? In other countries creating new currency with no backup in dollars generates in inflation  
> **username_1**: @username_0 it's a one-off inflationary stimulus, and *ceteris paribus* will lead to a fall in the value of the currency, so will help correct the trade imbalance.  
> **username_0**: so, if US has to create new currency to compensate 541.000 millions of euros of deficit (last year), sometimes over a trillion of deficit yearly, how is that the dollar doesnt devaluate and more or less keep its value? or is it all years devaluating?  
> **username_1**: @username_0 rather than asking new questions in comments, please do post them as new questions, where everyone can benefit, and you'll get more - and better - answers  

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### Answer by username_2 on 2016-08-19. Score: 1

Persistent trade or balance of payments deficits generate debt and other liabilities, either in the currency of the importer or in some foreign currency. This may be sustainable so long as lenders expect to be repaid in something of value.

The United States borrows in dollars, and the general expectation among its creditors is that its debts will be honoured (there was some doubt in [2011](https://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis_of_2011) and [2013](https://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis_of_2013)) and that others will accept dollars in the future.

For Argentina, this expectation is much weaker. In the past there have been defaults on borrowing in dollars (eight times since 1824, most recently in 2001 and 2014). Alternatively, Argentina could borrow in pesos, but there have been frequent [bouts of hyperinflation](https://en.wikipedia.org/wiki/Argentine_peso), which makes foreign lenders reluctant to lend.

So for the United States, its historical behaviour has created a degree of trust among its creditors which allows a sustained deficit. Argentina's history makes it harder to borrow, so any new suggestion of a persistent deficit means it soon finds financing imports more difficult, thus creating a crisis.


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