Why does America attract capital?

D. L. boddhisatva at mindspring.com
Thu Mar 11 12:17:05 PST 1999

C. Davies noted that:

> "Bodhisattva" has a theory that the Europeans and Japanese send their
> to America because the Americans are much more efficient at finding
> to do with them. I contend that the USA attracts money the old fashioned
> way -- by paying for it.
> These figures correct as of 1102 GMT
> Country 3month interbank 10yr
> Germany 3.12 4.09
> France 2.92 4.19
> Japan 0.08 1.77
> UK 5.13 4.70
> USA 4.58 5.20
> The Americans have higher interest rates than Europe or Japan, so they
> attract capital inflows, so they can finance their trade deficit. Some
> economist should make a model of this, or something . . . . . .

-and indeed I acknowledged, nay bespoke, this fact. I daresay that there are models and even so commonplace for me to have seen them. The question those who see portents of American doom have to answer is why paying these higher rates seem not to be a big deal. Why is it that the American borrowers seem not to be daunted by five and a half percent interest rates and the Japanese find two and a half percent too dear?

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