[MUSIC] Okay, it's one thing to know what a current account is to look at different transactions and see where to classify them and to know if they're credit or debit, that's important. But what I really want you to understand in this section, is what does it mean? What does it signify for us if we're thinking about growth, if we're thinking about a country's relationships with the rest of the world in the economic realm? So I'd like you to just picture in mind the world as a single market. A marketplace like, maybe we would find, if you go to the open market, farmers market or, if you go to a developing country, one of those huge marketplaces that sells everything, right? Imagine that this is the only place to buy and sell, and every country has a stall, okay? And we can't go to some other planet to buy or sell, and they're not going to buy from us. So basically, this is a place where trade in the market is going to have to balance, right? We're only buying from each other. Everybody who's selling is also a buyer. So sometimes I'm in my stall selling, sometimes I'm at other stalls buying. Now when a country sells goods, whatever it's got in its stall, it will earn some income. It will use that income to buy other goods from other stalls in the market. That's the only income it has, okay? So it will sell its things, it will have some income and it will buy other things. Now imagine that you've got a country in this market that sells maybe a hundred. And it goes out to buy and it doesn't really want to spend at all, it spends 80, okay? That country has a surplus and it's going to be building up some extra cash. Whatever cash is used in these transactions. It's going to be building up some extra money. This country is a saver. There may be other stalls in the market where the countries actually go out and they buy more than they sell. In other words, maybe they sell 100 but they actually go out and spend 120. You can ask yourself, how on earth do I spend 120 if I've only sold 100. Well, here is where things get interesting. That country that spent more than it sold is going to have to go to somebody else and borrow, so that it can spend that extra 20. Who's it going to go to? Well, obviously, it's going to have to go to one of those saver countries that didn't spend everything that they earned from their sales. And so we get these financial transactions happening along with the trade transactions. The countries that are saviors, that have some extra cash, they take that cash, they lend it to the countries that spend more than they earn. Now why do they want to do this? Well, its very much in their interest because they know that if they can lend money to other countries those countries will buy all of those goods and they won't have things left over at the end of the day. So you see the world is like this big marketplace. It's like this huge marketplace where there are no outside transactions. In this marketplace there are some countries that sell and buy exactly the same amount. There are other countries that actually sell more than they buy, okay? They're going to accumulate cash. They will lend that cash to the countries that buy more than they sell. Now one thing that's going on here is that those countries, the deficit countries that buy more than they sell that have a deficit on the current account, they're going to be building up debt, aren't they? They're going to have a debt that's accumulating over time with those countries that sell more than they buy. And the world is very much this way. As we'll be seeing, where we look at specific countries. And we're going to be seeing that there are some countries that habitually, year after year, tend to save some of what they sell, not spend it all. There are other countries, that habitually, tend to spend more than they earn with the sales. And they have to go to those saver countries, borrow the money so that they can continue to buy more than they sell. And we're going to have assets and loans building up in the world to match those transactions. [MUSIC]
