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| Wednesday, June 29, 2005 |
| Savings rates |
The blog Angry Bear has a helpful analysis of national saving and consumption rates by country. Obviously, the quick version is that household savings is very low comparatively in the U.S., and consumption as a % of GDP is high.
What does this mean? As you can see in the last column, our Current Account deficit means that, barring a change, the U.S. will continue to be a net borrower of money from the rest of the world, with almost all the world's lendings going to the U.S. to pay for our consumption. Some would argue that this makes sense because the U.S. is the best place to invest. But is that really still the case for investors in places like India and China where their investment might be much better off if directed within their own country?
I believe that this situation - the U.S. having to borrow billions of dollars a day to pay for its high consumption, both consumer- and government-based - presents a serious national security problem. Foreign governments and civilians own more of the U.S. every day. While we can easily go to war in poor Afghanistan or Iraq in the name of fighting terrorism, countries like China and Japan are decreasingly compelled to listen to U.S. interests, because they hold our economic balance in their hands. |
posted by CB @ 6:20 PM   |
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