… is from page 15 of my Mercatus Center colleague Dan Griswold’s superb new paper, “Plumbing America’s Balance of Trade” (footnote deleted):
Foreign investment in US Treasury bonds prevents the crowding out of private domestic investment. When the federal government can tap into the global savings pool, it means more of Americans’ domestic savings remains available to invest in housing, business expansion, and education. As the Economist magazine put it, “Globalized capital breaks the tie between saving and investment.” And that is especially good for Americans because the size of the investment opportunities in the United States is so much greater than the amount of savings available only from Americans. Without a net inflow of capital year after year, the number of investment opportunities in America that could be seized or created by investors would be limited by the size of Americans’ savings, depriving the American economy of investment that enhances its current and future productivity.
Foreign investment in US Treasury bonds prevents the crowding out of private domestic investment. When the federal government can tap into the global savings pool, it means more of Americans’ domestic savings remains available to invest in housing, business expansion, and education. As the Economist magazine put it, “Globalized capital breaks the tie between saving and investment.” And that is especially good for Americans because the size of the investment opportunities in the United States is so much greater than the amount of savings available only from Americans. Without a net inflow of capital year after year, the number of investment opportunities in America that could be seized or created by investors would be limited by the size of Americans’ savings, depriving the American economy of investment that enhances its current and future productivity.
