Donald Trump and the U.S. piggy bank
Justifying his imposition of tariffs on major U.S. trading partners, including Canada, Donald Trump angrily pointed to the rest of the world: "The United States has been taken advantage of for decades and decades… we're like the piggy bank that everybody is robbing and that ends."
It is hard to see how other countries have been robbing the American piggy bank and taking its savings. In fact, the U.S. takes in savings from other nations: it must borrow to make payments on what it owes abroad.
At the beginning of 2018, the U.S. owed the rest of the world about $7.7 trillion. This is the difference between U.S. investments abroad of $ 27.8 trillion and U.S. assets held by non-nationals of $35.5 trillion.
U.S. borrowing to cover current debt payments is only a sidebar to the main story. The rest of the world routinely holds U.S. dollars and owns debt securities denominated in U.S. dollars. By accepting the U.S. dollar as world money, the rest of the world is lending to the U.S.
This lending has given the U.S. the ability to spend abroad without having to worry about earning foreign currency to pay for its overseas investments and consumption.
No comments:
Post a Comment