by the CIA at $830 billion. This represents a net annual acquisition of
debt by the US or, equivalently, reduced US ownership of US assets. The
US is saving too little and Japan, China and the oil-exporters are
saving too much. See here and here. On the comparison between China and the US:
TheThe US can spend more than it earns by borrowing – its domestic assets are immense - and can do this for quite a while. But it cannot spend more than it earns without borrowing
numbers leave little doubt as to the extraordinary contrast between the
two economies. Last year China saved about half of its gross domestic
product, or some $1.1 trillion. At the same time, the U.S. saved only
13% of its national income, or $1.6 trillion. That's right, the U.S.,
whose economy is six times the size of China's, can't manage to save
twice as much money.
And that's just looking at national averages
that include saving by consumers, businesses, and governments. The
contrast is even starker at the household level - a personal saving rate
in China of about 30% of household income, compared with a US rate that
dipped into negative territory last year (–0.4% of after-tax household
income).
and that is what it seems now to want to do. There will be difficulties
in maintaining the high required rates of capital inflow if the US
sends out negative signals on the desirability of foreign investment:
But
as part of a pattern of other anti-foreign actions in Washington, fears
remain that the United States is becoming a less welcoming place for
investment from overseas.
"We need a net inflow of capital of $3
billion a day to keep the economy afloat," said... a former trade
official in the Reagan administration who is president of the Economic
Strategy Institute. "Yet all of the body language here is 'go away.'
Indeed
very negative signals are being sent out. Most prominently this week
the decision by Dubai Ports, a United Arab Emirates-owned maritime
company, at the center of a furious port security controversy, bowed to
pressure from Congress on Thursday and announced it would sell off its U.S. operations to an American owner.
The announcement had come just hours after House and Senate Republican
leaders bluntly told President Bush that Congress would kill the
company's $6.8 billion acquisition of London-based Peninsular &
Oriental Steam Navigation Co. and its operations at six major US ports.
The NYT notes that US reactions are analogous to similar opposition to foreign purchases of local assets in Britain and France:
“ItThere might be reasonable strategic or
may be well part of a global backlash against globalization," said
Michael Grenfell, a partner at the law firm Norton Rose in London.
"America could usually be relied on to champion free trade. If that
changes, things could get quite chilly."
In the United States, the
political flap over the ports deal is still not over…. members of
Congress had submitted some two dozen bills in the last few weeks aimed
at changing the review process for foreign investment.
Many,
without being specific, could end up blocking all kinds of deals. A bill
submitted in the House by Duncan Hunter, Republican of California, and
H. James Saxton, a Republican from New Jersey, for example, would bar
foreign-controlled concerns from buying any company that operated
"critical infrastructure," which could include everything from water and
energy companies to those involved in telecommunications. "It's almost
certain that one or another of those bills will pass,"…."The question is
whether it will have sufficient votes to override a veto by the
president."
security-related concerns here but there also seems to be a measure of
anti-globalisation sentiments in the US. This should hasten the US
dollar’s decline and spark the need for markedly higher interest rates.
Thank you very much for your comments