The United States current account deficit is growing at an increasing rate due to factors such as high oil prices, imports growing slightly faster than exports and low American savings. We should be concerned in the long run because these trade deficits are extremely large relative to U.S. GDP and the small U.S. export base. This concern over ever-larger deficits implies an even greater increase in the United States' net foreign debt and external balance. The United States has sometimes resorted to dollar depreciation to reduce the current account deficit. This passive approach suggests that a dollar depreciation of about 6 percent over a few years would be necessary to produce the same reduction in the accounting deficit as to achieve the objectives of the Balanced Budget Act. If the United States continues to depend on dollar depreciation, which results from changes in market designs, then ultimately there will be an increase in the budget deficit due to rising interest rates, increasing federal net interest payments. III. The gold standard was when the value of a country's currency was once tied to the amount of gold the country had. Anyone holding the country's paper currency could give it to the government and receive in exchange a face value from the country's gold reserves. The Gold Standard is the reason why countries have been preoccupied with conserving their gold instead of improving their business environment. The gold standard thwarted the Great Depression because the Federal Reserve raised interest rates to make the dollar more valuable, and thus prevent people from demanding gold. Instead of raising interest rates, the Federal Reserve should have lowered them so... middle of paper...... repo rates may have to increase; debts must begin to be repaid, borrowing must be reduced, and taxes must increase to try to offset the reduction in borrowing. This problem is likely to persist in the long term due to the crucial role that banks play in the market system. In today's globalized system, a credit crisis can spread throughout the economy and ultimately turn it into a global economic crisis. Side effects of this problem for banks include, for example, lack of confidence in lending, leading to reduced access to credit. This global financial crisis will likely be a long-term problem due to its nature. Although the global economy has begun to recover from the most oppressive financial crisis since the Great Depression, its financial systems remain flawed and there are domestic and external imbalances..