ABSTRACT
Current account deficits are unsustainable over the long run. At some point, countries have to pay back the money that their societies borrowed in order to live beyond their means. This conventional wisdom is deeply imbedded in our understanding of international trade and payments. Indeed, the long-term instability of current account deficits is more widely accepted than the doctrine of free trade. Protectionists may arise in different guises to reassert the advantages of restricting market access. But it is very rare for someone to go against the notion that persistent current account deficits are unstable; at some point the piper must be paid or, as Herb Stein put it, if something cannot go on forever, then it will stop.
