anything human is subject to variations of context, but "ceteris paribus", i think overall experience suggests that running indefinite trade imbalances is harmful to welfare. 1/

one channel is the politics that arise at breakdown. another channel is loss of tradables knowhow and capability for the deficit country. 2/

i can think of mitigations. for the US (at least until recently), the special role of the dollar, and the fact all debts are dollar denominated, reduces susceptibility to crisis and so harm through the first channel. 3/

other deficit countries enjoy this resilience to the degree they borrow in their own currencies, although absent a special international role, borrowers in their own currency usually eventually face limits from lenders. 4/

the sapping of tradables activity is something a wise government could overcome, by for example using fiscal flexibility foreign debt accumulation provides to sustain nonmarkets research and resilience organizations that sustain activity in tradables domains on largely a noncommercial basis. 5/

but in practice that kind of thing gas been very rare, and demands a lot of good calls by the state in terms of judging what capabilities to sustain and subsidize without market guidance. /fin