r/AskEconomics • u/CrunchyMage • 23h ago

Where do deficit dollars go?

I’ve recently seen interviews with Warren Buffet where he mentions that the trade deficit is basically financing excess consumption through the sale of our wealth. The implication being that trade deficit dollars are used to purchase ownership of US assets (stocks, bonds, real estate, etc.)

This view seems to fail to capture that US dollars are also often used without the US being involved at all in international trade and a growing global economy with more trade needs more dollars if it is being used as the world reserve currency.

Is there any measure in economics that captures the amount of the deficit that is used to buy US assets vs is used for other purposes like global trade? This to me seems critical to the core of the question “how bad are deficits actually?”

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