Is the dependence on foreign debt capital affecting U.S. hegemony

Despite what you have heard or read in the media our heavy reliance on foreign debt capital, mainly from China and other Asian capital markets, are not adversely affecting our global position. Granted the dollars is weak, but in no way is it threatened as the global monetary standard. Our economy will have to adjust to the devalued dollar which will inevitably lower our standard of living but not affect the U.S. global position. In regards to the large amount of foreign debt capital this is a sign of growth much like a leveraged firm, the U.S. economy is expanding with innovations and the applications of new technology. And what if we lose our needed foreign investors, not likely. China for example, is one of our largest financiers, but China needs us more than we need them. China's booming manufacturing sector is only booming due to the high U.S. imports of their goods. The U.S. of course is not the only importers of Chinese goods but we are the largest, as to say China is not the only foreign creditor of capital but is the largest. So even if the dollar is low this will not lead to a selloff of U.S. assets by foreign investors. Other countries not just China depend on the U.S. economy for stability in thier economy. Especially in the Asian markets with thier aptness for deflation and economic stagnation. For a more broader perspective please read this article.

1 comment:

Dr. Tufte said...

-2 for multiple punctuation errors in Vincent's post.

What does this have to do with ManEc?

This post does a good job of pointing out that some "bad" things you hear about have another side. In this case, people in the U.S. worry about the amount of investment foreigners are making here. To turn that around, do you think that people in other countries are wondering why the smart money over there gets invested here? That can't be good, now can it? My point is not that I have much a preference for making or getting investment funds, but that you can't talk about the one without talking about the other. Yet that is precisely what people who worry about the effects of foriegn investment in America have to do to make their point.