Balance of Payments

The balance of payments is a country's money diary with the rest of the world. It has two main parts: the current account (trade in goods and services, plus income and transfers) and the capital and financial accounts (investment and borrowing flows).

Because every dollar that leaves must be matched somewhere, the parts balance overall. The interesting bit is the mix. A country that buys far more than it sells must attract investment to fill the gap, and if that money gets nervous, its currency can be hit hard.