On Wed, Aug 11, 2004 at 12:59:54PM -0500, Dan Minette wrote: > Playing with numbers I took the accumulated balance of trade imbalance > in goods and services since 1960 and divided it by the GDP. This is > akin to dividing the total household debt by the household income. > When we have a balance of trade deficit, money flows out to make up > the differences between goods sold and bought.
I think it is more accurate to say that certificates (bonds, stock certificates, IOU's, etc) flow out, not money. The trade deficit is financed by foreign investment in the US -- most recently by countries like Japan and China buying US bonds, and before that by foreigners buying US equities. > At what point does this become disturbing? Is it when its 100% of > GDP, 200%? never? If never, why? Basically, we are selling our assets for current consumption. Foreigners own a certain percentage of US assets at any given time, and that perecentage has been going up for quite a while. I vaguely remember Warren Buffett writing an interesting comment about this some time ago (if you are interested, I can try to dig it up). So, a better way to ask your question might be, at what percentage of foreign ownership of US assets does a problem arise? At 100%, then we would all be working for foreigners to earn our room and board. Would that be a problem? Many people would consider it one. So, at what percentage less than 100% do we cross over from acceptable to unacceptable? -- Erik Reuter http://www.erikreuter.net/ _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
