The United States and Global Capital Shortages: The Problem and Possible Solutions

The United States and Global Capital Shortages: The Problem and Possible Solutions

The United States and Global Capital Shortages: The Problem and Possible Solutions

The United States and Global Capital Shortages: The Problem and Possible Solutions

Synopsis

Gordon maintains that the United States must implement policy measures to reduce the large amounts of capital it is borrowing from the rest of the world--a problem she attributes, mainly, to low private savings rates and high federal budget deficits. She explains how the United States became a debtor nation, describes the changes in global capital markets that occurred in the 1980s, and analyzes the extent of global capital requirements, the drop in the U.S. savings rate, and the policy measures that could be taken to raise it. Unlike most discussions that focus on faulty international trade practices as a cause of U.S. deficits, Gordon places a large share of the responsibility on U.S. macroeconomic policies. Concise, readable, lucid, Gordon's book will be useful to professionals in banking and finance, and to academics and upper-level students of international business, finance, and economics.

Excerpt

By 1982 the United States had become a net importer of capital. Low personal saving rates and large federal budget deficits were responsible for the drop in the U.S. national saving rate, which fell from 20.8 percent of gross domestic product in 1977-81 to 14.6 percent in 1993. Although it declined continuously, the domestic investment rate exceeded the saving rate, and foreign capital supplied the difference. Large internal imbalances between saving and investment were reflected in external imbalances between exports and imports, and it has been projected that the current account deficit in the U.S. balance of payments will remain at about 2.4 percent of gross domestic product for the remainder of the decade. This means that the United States will continue to import foreign capital and increase its external indebtedness, resulting in ever increasing outflows of resources to service the foreign debt.

The United States remains the largest net importer of capital, contributing to a shortage of global capital. Such a shortage foreshadows severe economic consequences in the form of high real interest rates, stagnant levels of investment and economic growth, and reduced standards of living for the industrial nations. The developing nations and the emerging market economies of Central and Eastern Europe and the countries of the former Soviet Union will also suffer greatly from inadequate levels of trade and investment.

The motivation to write this book resulted from recognition of the fact that the large saving-investment imbalances and the need of the United States for substantial amounts of foreign capital would continue unless measures were taken to raise the national saving rate sufficiently so that national . . .

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.