Greenspan on U.S. foreign balance

[Brad DeLong]

>Alan Greenspan, in a speech delivered today 
><http://www.federalreserve.gov/boarddocs/speeches/2002/20020313/>:
>
>>During the past six years, about 40 percent of the total increase 
>>in our capital stock in effect has been financed, on net, by saving 
>>from abroad. This situation is reflected in our ongoing current 
>>account deficit, which, by definition, is a measure of our net 
>>investment in domestic plant and equipment financed with foreign 
>>funds, both debt and equity. But this deficit is also a measure of 
>>the increase in the level of net claims, primarily debt claims, 
>>that foreigners have on our assets. As the stock of such claims 
>>grows, an ever-larger flow of interest payments must be provided to 
>>the foreign suppliers of this capital. Countries that have gone 
>>down this path invariably have run into trouble, and so would we. 
>>Eventually, the current account deficit will have to be restrained. 
>>The nation's economic potential will be brighter if that comes 
>>about through an increase in domestic saving rather than a 
>>reduction in domestic investment.
>
This is one of those rare instances where somebody important worries 
about this in public.

Half of the 2000 Federal Reserve Jackson Hole Conference was devoted 
to this and related topics...

Brad Deong