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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: LLCF who wrote (29041)2/21/2003 6:08:24 PM
From: GraceZ  Read Replies (3) of 74559
 
Hey, for all I know Jay's holding the mortgage on my house. -g-

When someone points out that the US trade deficit results in the US being indebted to foreigners I like to ask them if they know what the percentage of foreign investment flows into the US winds up in the form of debt, as opposed to cash instruments, equity and real estate.

Dollars that we pay to importers are not debt, they are dollars. Placed in a reserve bank account overseas they act much the same way they act here in a reserve account. They don't have to come back to the US to be used by the foreign company who receives them although they certainly can and do come back here. A dollar paid to China could wind up paying for oil in Russia or drugs from Columbia.

The US debt owned by foreigners as a percentage of their dollar denominated holdings is always a fun number when you can get a hold of it. In 1999 it was about half and half of their holdings, half debt and half equity and real estate.

Also, how much of our GDP goes to service this huge foreign owned debt:

Net payments to finance our foreign "debt" were less than $20 billion in 1999, about one-fifth of one percent of GDP.

Let's say that figured quadrupled from 1999, just for argument sake. That's less then 8/10's of one percent of the GDP.

Now I'm worried.
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