Doug Henwood wrote:
> The flow of foreign capital into the U.S. credit markets has been enormous, and
> little noticed compared to the 1980s.
>
> As of the end of 1998, foreign financial claims on the U.S. were $5.4 trillion,
> while U.S. claims on foreigners were $2.7 trillion, for a net balance of -$2.7
> trillion. That's deteriorated by about $1 trillion since 1996. About half of
> that has gone into Treasury bonds, and a quarter into corporate bonds. This
> gusher of foreign money has kept the real and the financial circulations
> circulating wildly.
>
With an US annual trade deficit falling around $250 billion, only half of the $1 trillion deterioration is caused by trade. The other half is domestic consumption on credit.
Henry