Balance of Payments and Invisibles
In many countries a useful distinction is drawn between the balance of trade and the balance of payments. 'Balance of trade' refers to the trade of both tangible (physical) objects as well as the trade in services – collectively known as exports and imports (in other words, 'visibles plus services') – while the 'balance of payments' also includes transfers of Capital in the form of loans, investments in shares or direct investment in projects.
A nation may have a visibles balance surplus but this can be offset by a larger deficit in the invisibles balance (creating a Balance of Trade deficit overall) – if, for example, there are large payments made to foreign businesses for invisibles such as shipping or tourism. On the other hand a Visibles Balance deficit can be offset by a strong surplus on the invisibles balance if, for example, foreign aid is being provided.
In a similar way, a nation may also have a surplus 'balance of trade' because it exports more than it imports but a negative (or deficit) 'balance of payments' because, it has a much greater shortfall in transfers of capital. And, just as easily, a deficit in the 'balance of trade' may be offset by a larger surplus in capital transfers from overseas to produce a Balance of Payments surplus overall.
Read more about this topic: Invisible Balance
Famous quotes containing the words balance of and/or balance:
“It has been the struggle between privileged men who have managed to get hold of the levers of power and the people in general with their vague and changing aspirations for equality, for justice, for some kind of gentler brotherhood and peace, which has kept that balance of forces we call our system of government in equilibrium.”
—John Dos Passos (1896–1970)
“Bourgeois society is infected by monomania: the monomania of accounting. For it, the only thing that has value is what can be counted in francs and centimes. It never hesitates to sacrifice human life to figures which look well on paper, such as national budgets or industrial balance sheets.”
—Simone Weil (1909–1943)