Foreign Holdings of Federal Debt – Justin Murray, Information Research Specialist and Marc Labonte, Specialist in Macroeconomic Policy. July 3, 2012
“Foreign ownership of federal debt has become a growing concern among some Members of Congress because of the nations large and rising trade deficit. During the past three decades, U.S. national saving has not been adequate to finance its capital investment needs, and borrowing from abroad has covered the gap. For foreigners to invest in the U.S. economy on net, the United States must import more than it exports (run a trade deficit). When the government runs a budget deficit, as it has done since 2002, it reduces the national saving rate. This implies that domestic investment must fall, unless private saving rises or borrowing from abroad increases.”
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