Magazine article Newsweek

Show Us the Money: America Needs the World's Cash

Magazine article Newsweek

Show Us the Money: America Needs the World's Cash

Article excerpt

Americans have always wondered just how much the rest of the world really loves them. Well, we're about to find out. As the U.S. economy slows, foreigners will have to decide whether they want to keep investing their money in American stocks and bonds. If they choose to go elsewhere, things could get much worse in the United States.

The U.S. economy has slowed at a particularly inconvenient moment in the world economy. The last time we were in recession--in the early 1990s--the rest of the world was doing quite well. Germany, Japan and the Asian tigers were all booming. Plus the U.S. dollar was cheap, which made American exports affordable around the world. The result: foreigners picked up the slack, and the American recession was the least painful since 1945.

This time around Japan is stagnant and the other Asian economies are still hurting from the '97-'98 crisis. In Germany, growth is slowing. And the dollar is at a high, making American exports very pricey. So the rest of the world will be hard-pressed to cushion America's fall.

Slow growth abroad has been a boon to America in one important respect. We have become the world's favorite investment in the 1990s. Japanese, German, Latin American investors have all put their savings in America rather than their own countries. Thank goodness, because we need the cash. These days Americans spend more than they earn. So we depend on foreign investments and loans to make up the difference--especially since our savings rates have plunged in the last decade. …

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