why does the balance of payments balance?!?!?! serious but imbecilic problem here!

Discussion in 'Trading' started by TGpop, Apr 3, 2010.

  1. TGpop


    can someone explain to me why the balance of payments balances? im really confused lol.

    if we import more than export- how does that mean we have to borrow?!!?
    i understand that when we borrow it comes in as a credit (+) in the capital account but why does the economy need to do that when it doesn't need to?
  2. Doesn't the balance of payments balance by construction? It's just a special case of a double-entry bookkeeping method for a country...
  3. TGpop


    what do you mean by double entry book keeping ?
  4. Hmmmm, that would be the most fundamental accounting methodology that was invented in the 13th century (in fact, probably before then) and is the basis for all contemporary accounting. Pretty much anything that has two sides to it, such as a balance sheet, is an example of double-entry bookkeeping.