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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (7335)5/16/2006 7:13:31 PM
From: rich evans  Read Replies (1) of 33421
 
Using assets instead of GNP seems like the right way to look at things.

Right now US explicit debt is about 9 Trillian. But 1/2 of that is owed to SS trust fund so is really not explicit, marketable and more like a future unfunded liability .

Of the 4.5 Trill real explicit US bonds the foreigners I think I read hold 40% of it or about 1.8 Trillian.

I say hold. In effect they have invested that much in US bonds, mostly shorter term and roll it over all the time.

They could invest in other things as well in US with their dollars. They have and could buy stocks, companies, real estate etc. All these assets they can invest in and that is why the articles looking at assets is in my judgment correct.

On the FED RESERVE site many speeches have been given by the governors on the Current Account Deficit. They all say it is not a problem except in the very long term and is self correcting. The reason they give is that the current account deficit must exactly equal the capital account surplus- that is the investments in the US assets with the extra overseas dollars.

Also how you measure the current account deficit is complicated and interesting. It involves many things besides Trade. Buying a US product from a US based foreign company like a car would add to the deficit to the extent the profit was used by the parent overseas. Likewise for all our US companies based in Bermuda, singapore etc.- complicated.

Don't worry be happy
Rich
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