Balance of Payments Accounting

In international trade, a country's balance of payments can be summarized by the equation: CA = FA. CA is the Current Account that measures Net Exports. The Financial Account measures investment in assets such as stocks, bonds, direct foreign investment, land, and the like.
What happens when the CA is negative? Then the FA is positive. If the United States imports more than she exports, NX will be negative and have a debit balance. The financial account will be positive and have a credit balance. A positive or credit balance in the financial account means that the US has a negative current account balance. In other words, she is selling off her real assets for current consumption now.

The graph on the right shows that the US has had four decades of a negative current account balance. We soon will have nothing left to sell except our ideas, education, and human capital.