Q. Why do governments prefer to avoid excessive current account surpluses? Or, why are growing domestic claims to foreign wealth ever a problem?
Answer: On behalf of a given level of national saving an increased current account excess implies lower investment in domestic equipment and plant. some reasons why first the returns to domestic savings may be easier to tax than those on assets abroad second an addition to the home capital stock may reduce domestic redundancy and so lead to higher national income third domestic investment by one firm may perhaps have beneficial technological spillover effects on other domestic producers that the investing firm doesn't capture. In addition the country may perhaps in the future find itself unable to collect the money it is owed. Additionally countries with large surpluses are able to become targets for discriminatory protectionist measures by trading partners with external deficits.