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Reflections on the U.S. long-term capital inflows

Author: WuZuo From: www.yourpaper.net Posted: 2009-12-01 05:44:18 Read:
[Abstract] the United States since 2000, foreign trade continued to show the structural deficit and expanding the overall size, the Press ? Bernanke said the U.S. current account deficit was mainly due to massive inflows of capital outside the United States, that "global savings glut . " But a more fundamental reason is financial, interest rate and trade policies pursued by the United States itself, especially the consumption patterns of domestic consumption in advance. In order to avoid the economic recession and maintain economic prosperity, the United States early consumer advocate domestic consumption patterns, exacerbating the trade deficit. While taking advantage of the low interest rate policy and the fiscal deficit policies policy caused by lax regulation continue to intensify efforts to stimulate consumption and investment.
[Keywords] structural trade deficit with the root causes of global savings glut

Following the "two rooms" by the U.S. government after the takeover, the fourth-largest U.S. investment bank Lehman Brothers filed for bankruptcy protection, century-old Merrill Lynch into bankruptcy eventually acquired by Bank of America, and other prominent U.S. financial institutions such as Goldman Sachs, Morgan Stanley, Washington Mutual Bank and the International Group are crumbling, the subprime crisis into a comprehensive and deep-seated outbreak stage, and quickly spread to all over the world. People suddenly realized that once-in-a-century financial crisis. Early in 2005, was yet to be nominated as Federal Reserve Chairman Ben Bernanke has questions: "Why is the United States, the world's largest economies, a large number of borrowed funds to the international capital markets, rather than the usual case of a more natural The funds lent? "This paper will focus on long-term capital inflows, the status quo further analysis of the Origins of.

First, the U.S. long-term capital inflows status quo

From the perspective of macroeconomics, the current account balance = savings - investment = trade balance, domestic savings is insufficient to support domestic investment, net imports of the product to meet the investment needs to generate current account deficit, the formation of domestic assets . Its results will be caused by the inflow of foreign capital to generate foreign debt, in fact, is the use of foreign capital to make up their own savings gap. As can be seen from the U.S. National Bureau of Statistics data, since 2000, the United States foreign trade continued deficit, and the overall size of expanding. From the district, the U.S. trade deficit with major source countries are China, Japan, Canada and Mexico. The high rate of growth in the U.S. trade deficit countries are China, Canada and Japan.

Second, the global savings glut
external causes of the U.S. financial crisis

A global savings glut reason
Paul Krugman answer referenced in his article "United States, do not cry for me," Ben Bernanke's analysis "of the U.S. current account deficit is mainly due to the external", ie, "global savings glut (global saving glut ). " Its ideas are as follows: in the 90s of the last century, the emerging Third World countries, especially the rapid economic development of Southeast Asian countries as the main concentration of the capital of the world, resulting in the local economy, especially the capital market and the real estate market bubble growth, when the short-term Lee goal to achieve, and this part of the rapid withdrawal of funds, the economic bubble burst and caused the Southeast Asian financial crisis in 1997. Third World countries experiencing serious blow to suddenly aware of the importance of financial supervision and foreign exchange reserves, governments have a lot of hoarding preventive funds to strengthen the stability of the financial status. Rapidly expanding foreign exchange reserves need to find a new growth point of interest, out of concerns about instability in the domestic market is expected these countries to fund tentacles stretched overseas markets, hoarding funds into overseas assets to achieve added value expected result, these countries from the capital importing country into a capital-exporting country. As the United States since the 1990s, the high-tech industry prosperity lead to productivity gains and increased earnings, while the United States take for granted as an investment because of the development of the U.S. capital markets are more mature and have a good level of supervision as well as the dollar is the main international reserve currency, etc., 's paradise, attracting a lot of accumulation of savings, resulting in long-term U.S. current account deficit. Global savings glut on the U.S. economy
China, Japan and other Asian countries, savings relative to investment in large excess, once the savings capital inflows to the United States will lead to increase in the real exchange rate of the United States, the substantial growth of the current account deficit. This phenomenon is the British "Financial Times deputy editor and chief economics commentator, Martin Wolf called" Revenge of the Asian "viewpoint. The data show that the United States not only absorbing 70% of the excess capital in other countries in the world, and consumption accounted for 91% of the increase in GDP, global local excess savings cause U.S. excess consumption.
But the U.S. trade deficit continued to widen to a large number of cheap goods and cheap and abundant capital inflows, accelerating the upgrade of industrial structure, reducing the rate of inflation in the United States, increased employment, and to make up for the lack of savings, and support the development of investment, which in to some extent, to promote economic growth in the United States. Strong attraction of the international status of the dollar and dollar-denominated assets and the trade surplus with the country's foreign exchange reserves in order to preserve the value of the value-added steady stream shed the United States, is also in the context of the rapid development of economic globalization and information technology, the United States high-growth, low- inflation, low unemployment rate of economic development of the important reasons. Therefore, the "savings glut" theory is a dangerous attempt to try to shift the current financial crisis root cause, not the root cause of the long-term U.S. trade deficit.
Third, the domestic policy of the United States is the root causes leading to capital inflows
Low interest rate policy and the fiscal deficit policies
The United States in order to maintain economic prosperity and avoid economic recession, continue to intensify efforts to stimulate consumption and investment. To this end, the United States interest rates and fiscal policy, a two-pronged impetus for U.S. economic growth. On one hand, the U.S. government continue to lower interest rates to stimulate consumption and investment. The lower interest rates will reduce savings, thereby increasing consumption; also means lower interest rates reduce the cost of the investment, thereby stimulating increased investment. U.S. domestic savings greatly reduced due to the reduction in interest rates and the expansion of the fiscal deficit, a substantial increase in domestic investment, leading to the emergence of trade deficit.
Restrict the export trade policies exacerbated the deficit
Economic globalization to promote the transnational flow of factors of production, the international division of labor presents a new pattern: the transfer of labor-intensive production to countries with lower labor costs, capital and technology-intensive production is concentrated in the United States on behalf of the developed countries. Developed and developing countries have their own advantages and complement each other. The United States in a large number of imported consumer goods to meet the huge demand in the domestic market at the same time, but then export all kinds of obstacles, and to prevent their own high-tech products exported to developing countries. This is another important reason why the United States a huge merchandise trade deficit.
The development strategy of growth in domestic demand and domestic consumption in advance consumption patterns
2/3 of the U.S. economy, supported by consumer spending, and thus occupies a very important position in consumer spending in U.S. economic activity. In order to promote domestic consumption, the United States has continued to relax the efforts of credit as well as the regulation of the financial derivatives market, the last outbreak of the financial crisis lay hidden dangers. For any country, beyond the current income growth of affordable consumer can only borrow capital from abroad, and performance in the international balance of payments, is the increase in the trade deficit. For Western countries believe that the foreign exchange reserves of China and other countries into the to induce resident of the United States to advance consumer remarks, but also far-fetched, formerly huge foreign exchange reserves in China is not yet an important economies and even in China consumption habits in the United States began . U.S. housing market bubble, the Americans are the result of price gouging.
Therefore, China and other Asian countries, some Western economists raised huge amounts of foreign exchange reserves is the main cause the U.S. financial crisis, and inferred that the financial crisis is "Revenge of the Asian" remarks were based on their own political and economic interests, and the root cause of the crisis is the United States itself pursued fiscal, interest rate and trade policy, especially ahead of domestic consumption, consumption patterns.

References:
[1] Martin Wolf Revenge of the Asian Financial Times .2008 (10)
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