Why could high current account deficit lead to a weaker $$$ & why could a weaker $$$ push up interest rates?
139710
The deficit is money owed by the government to several different places.  Examples are, U.S. citizens, U.S. companies, Japan, China, other goverment agencies that didn't use precious budgets...  Interest is paid on this balance every year.  As the national debt grows so too does the interest paid.  Because the government also makes the money, they could in theory simply print more money and give it to their creditors.  If they did that, the U.S dollar would become weaker compared to other countries money.  Cutting a pie into more slices without making the pie any bigger will mean each slice of pie is smaller.  Same principle applies to monetary policy.\n\nAs the government makes more money, inflation kicks in.  A dollar in 1940 could buy a lot more than it does today.  People that invest in things like banks and the stock market expect to beat inflation and even get more.  For instance inflation runs about 3 percent per year on average.  So on any investment you need to get more than 3 percent return or you will loose purchasing power.  \n\nTo pull it all together.  Government gets to a point that interst owed on national debt is higher than GDP.  This means that we can not make more in a year than we owe. (Not likely to happen but proves a point)  The only way the government can pay its debt is by doubling the amount of money in circulation.  This would cause every dollar to loose 50 % purchasing power.  The only way you could convince me to save my money rather than spend it would be by offering more than 50 % rate of return.  If a bank is offering lets say 55 % interest rates then they too have to make more return on their investment.  The people they loan the money to (home owners through morgages) would have to pay more than 55 % on there home loan.  People would stop borrowing money at such a high rate, demand for houses would fall.  The supply of houses would stay about the same.  Decrease demand holding supply the same would lower the price of homes.  Thus create a market crash
519789
it's the feds way of compensating for some economic thinga ma gig...\n\nIt is the job of the Federal Reserve to keep the economy going at a sustainable healthy rate and when they believe it could be moving too fast, then their tool that they use is to raise interest rates,"
59212
Simply, because the economically condition is different from one country to another. So is the political condition. Those two elements are playing the greatest role in making the currency rates varied.
479833
The Fed is still raising rates.  The country is at war (always creates inflation).  Unemployment is low and the economy is booming.\n\nRates will go up.
425387
Historically, countries have overprinted their currency, leading to devaluation, and often, dire economic crises such as depression.  A careful balance must be struck to ensure that the money in circulation does not adversely impact the economy.
516270
I like this question and feel stupid that I don't know the answer. I should have taken that class on Central Banks. My guess is that it is a combination of the money supply, interest rates and government assets held (tresuries) by other countries.
1142697
Printing more money causes inflation.  The more money there is in the economy for the same number of goods, the greater the cost of each good.  \n\nInterest rates are a combination of the inflation rate and the "real" interest rate (that discounted for inflation).  If inflation increases, the interest rate goes up.  The government pays its debt with interest.  As such, it just got a lot more costly to pay off the debt.\n\nSo ... if a lot of money is printed, we get all of the negatives associated with inflation and the devaluation of the currency, plus it will cost a lot more to pay off the debt.
510758
It is when the dollar assumes status of primary reserve currency in the international financial architecture.  It prevents exporting nations from spending domestic dollars they earn from the U.S. trade deficit and forces them to finance U.S. capital surplus.  This sends wealth to the U.S. in exchange for the privelege of financing U.S. debt to further develop the U.S. economy.\n\nThanks for asking this, had never heard of it so I learned something new today!  I just had to look it up when I read it, make sure you weren't making something up.  :)  No offense intended.
1075620
The term current account usually refers to the current account of the balance of payments (BOP) and contains the import and export items of goods and services as well as transfer payments including net investment income. The current account is often presented alongside the capital account and financial account of the BOP which contains data about short and long-term capital flows. Long-term capital flows are also known as foreign direct investment (FDI). Often, the capital account and the financial account are both referred to as the capital account. The BOP balances by means of a balancing account which allows for changes in official reserve assets.\n\nWhen it is talked about most, the current account will be either in large surplus (export receipts exceeding import payments) or substantial deficit (import payments exceeding export receipts). Generally it is a significant current account deficit (rather than a surplus) that is perceived to be a problem requiring action, but the current (trading) and capital (largely financial) accounts are inter-related and a persistent capital surplus can (by raising the exchange rate above the level it would otherwise reach) cause a current account deficit.
1092841
it's called "leverage"\n\nIt is smart to borrow money when you expect that you'll make a better return on that money than the interest you will have to pay.  Almost every country AND many businesses owe money for this reason.
1029597
Hmmmm.. I think because they are borrowing from different central banks
114710
Amazingly, President Bush has managed, with his batty attack on Iraq, to drain the treasury of the credit balance Clinton left it with and turn it into a huge deficit.  Maybe a drop in the dollar's value will give a temporary boost to exports, but that won't go anywhere to offset the tragedy.  Bill got blown, but George has blown America : her finances AND her moral credibility.  I don't know which is worse.  I just don't want to think about it.
1087985
With higher interest rates, people don't buy as many houses and cars. Businesses don't construct as many new factories. So, there's not as much need for oil, concrete, steel, labor, etc. Lower demand means lower prices. Or, at least, prices that don't rise as much.
348246
I couldn't understand what is it exactly what you are asking. But i will do my best to give and honest answer that might shed some light on you.\n\nThe idea of a negative effect of the trade deficit has been discussed thoroughly by economists and it seems like we haven't got a proper answer yet. Is it good or bad? we don't know yet. WE know deficit and surpluses are favorable and unfavorable.\n\nAn expanding U.S. economy fuels demand by American consumers and producers to buy more imports as well as domestically produced goods and services.\nRising U.S. domestic output, in turn, attracts the foreign investment that finances an expanding U.S. current account deficit. \nIn contrast, slowing U.S. domestic demand not only depresses U.S. output and employment growth — but also lessens demand for imports and the inflow of foreign investment. \n\nIn addition to the uncertain causality, the evidence also does not address the question of how persistent and rising current account deficits may affect the U.S. economy in the long run.\nThe "sustainability" of the U.S. current account deficit has been much debated among the experts. But whatever negative impact the deficit may have in the long run, there is no evidence that it poses a drag on the U.S. economy in the short run. \n\nWhy does all this matter? The answer is simple. Misperceptions about the U.S. trade deficit and the economy can tempt U.S. policymakers to "do something" about the deficit to show that they are concerned.\n\nFrom my point of view i would say that a trade deficit (just as a fiscal deficit) is a tool used by a country to do some economic policy.\n\noh, and that "natural market consequence" that you are looking for might be the exchange rates. A fall in the exchange rates will cause foreigners to buy more of our goods and us to buy less foreign goods.
801457
Lots.  Let's see, where to start.  How about higher interest rates.  The Fed just keeps on increasing the rate to try to cool down the economy but this put pressure on everyone with adjustable rate mortgages and interest sensitive credit cards.  This sucks money out of the private sector as does the higher cost of gas and therefore we have less money in our pockets.  We tend to borrow more and with more credit card debt comes more chance of default.  As the cost of increased gas and therefore inflation then workers want raises and this pressures CEO's to play with the books to keep up their record profits.  How's that for a start?
1071949
Higher interest rates in the United States mean that the supply of US dollars is lower (because less borrowing is enabled).  As a result, it will take more euros to purchase a certain amount of dollars and thus fewer dollars to purchase a certain amount of Euros.  This means that the US dollar will become stronger in relation to the Euro (i.e. a change similar to 1.26 dollars/euro to 1.1 dollars/euro).
1186929
If by expansionary you mean investing in other currencies, it would probably drive the domestic rate downwards. If a country doesn't trust its own currency why should the people?\n\nA contractionary money policy? You got me on that one. Not familiar with what that term means.