International Finance in USA Assignment Example | Topics and Well Written Essays - 1750 words

International Finance in USA - Assignment Example Last March 9, 2006, the US Census Bureau/US Bureau of Economic Analysis issued a press release outlining the state of the country’s economy. It announces that total January exports of $114.4Billion and imports of 182.9 billion resulted in a goods and services deficit of $68.5 billion, which is $ 3.4 billion, more than the 65.1 billion in December. January exports were 2.8 billion more than December exports of 111.6 billion. January imports were 62.2 billion more than December imports of 176.6 billion. (U.S. Department of Commerce, March 9, 2006). The balance of payments (or BOP) is a measure upon which a country traces how much money flows into or out of a given country or countries1. Factors involved in the determination of balance of payment is the country’s export2 and import3 of goods, services and financial capital4, including financial transfers. The need for some balance of payments statistics can be traced back to the Fourteenth century when the Bullionist Doctrine5 was developed in England which led to the prohibition of export of bullion. This is the early form of Mercantilism which seeks to achieve an equilibrium between the value of exports and imports (Soderstien 1980). The latter part of the Mercantilist period observed that there are also transactions which stem from trade relations outside of the country and should be taken into considerations in order to establish a state of economic equilibrium. The principle of balance of payment gives us an idea of how much money or wealth is flowing and how much is flowing out of the county. If the amount of wealth flowing out of the country is more than the amount flowing into such a country, we have a negative balance of payment or a deficit. In the same manner, where more wealth enters into the country than that which flows out, then we have a positive balance which we refer to as surplus.