What is the core idea of the Pitchford Thesis regarding the Current Account Deficit?

The Pitchford Thesis posits that a Current Account Deficit (CAD) does not necessarily indicate economic instability, particularly when it arises from private sector decisions that are free from distortions of market mechanisms. According to this theory, if the private sector is making rational investment choices, even if these choices lead to a deficit, they can still reflect a healthy economy where foreign capital is being attracted for productive investment. This perspective emphasizes that CADs can be the result of sound economic strategies, such as investing in growth opportunities that may initially require borrowing from abroad, as long as those investments yield returns that exceed the costs of the incurred debt.

In this context, the other options don't align with the main tenets of the Pitchford Thesis. It's important to note that the thesis is less about setting strict rules on economic factors like savings and investments or external debt limitations and more focused on the nature of private sector decisions and their implications for economic health.