,
5 tweets,
2 min read
Read on Twitter
Great series of posts by Brad Setser: basically less than 4% of FDI into the US consists of “real” investment in new plant, equipment, logistics, etc. The rest consists of stock acquisitions. Throw in other portfolio inflows, and the share of foreign capital inflows into the...
...US that go to “real” investment is probably within a rounding error. While there is an argument to be made (not terribly strong) that “real” foreign investment in new plant, equipment, logistics, etc. causes total productive investment in the US to rise, the argument that...
...portfolio inflows and stock purchases raise productive investment in the US rests on the assumption that by raising asset prices and lowering the cost of capital, they create incentives for American businesses to boost productive investment. This would be true in an America...
...of strong demand and scarce capital, but in today’s world of weak demand, huge cash balances on business balance sheets, and historically low costs of capital, lowering the cost even further will have no impact on total investment. So while banks and the owners of these...
...assets clearly benefit, how does the US overall benefit from the huge distortions that these massive foreign inflows cause to domestic savings and credit?
carnegieendowment.org/chinafinancial…
carnegieendowment.org/chinafinancial…
