1/6
This FT article suggests that foreign investors can help prop up the US Treasury market as the Fed begins to cut back on its bond buying, but I disagree. I would argue that this idea of foreign "support" of the US bond market is based...
ft.com/content/47551b…
This FT article suggests that foreign investors can help prop up the US Treasury market as the Fed begins to cut back on its bond buying, but I disagree. I would argue that this idea of foreign "support" of the US bond market is based...
ft.com/content/47551b…
2/6
on viewing US debt incrementally, rather than systemically.
An important series of papers by @profsufi, @AtifRMian and @ludwigstraub have already shown that in the US, when rising income inequality causes an increase in the savings of the...
scholar.harvard.edu/files/straub/f…
on viewing US debt incrementally, rather than systemically.
An important series of papers by @profsufi, @AtifRMian and @ludwigstraub have already shown that in the US, when rising income inequality causes an increase in the savings of the...
scholar.harvard.edu/files/straub/f…
3/6
rich, this paradoxically does not lead to more US savings but rather to more US debt among lower income Americans. I argued in my 2013 book that this is because US investment is not constrained at all by scarce savings, and so more savings cannot result in more investment.
rich, this paradoxically does not lead to more US savings but rather to more US debt among lower income Americans. I argued in my 2013 book that this is because US investment is not constrained at all by scarce savings, and so more savings cannot result in more investment.
4/6
In that case there cannot be more savings overall either, and so the economy must adjust in some other way to prevent overall savings from rising. It usually does this in the form of higher unemployment or (much more likely) higher household or fiscal debt.
In that case there cannot be more savings overall either, and so the economy must adjust in some other way to prevent overall savings from rising. It usually does this in the form of higher unemployment or (much more likely) higher household or fiscal debt.
5/6
The same thing happens with foreign inflows into the US bond market. Because they too do not cause US investment to rise, the US economy adjusts to foreign inflows either by raising unemployment or (again, more likely) by creating more household or fiscal debt.
The same thing happens with foreign inflows into the US bond market. Because they too do not cause US investment to rise, the US economy adjusts to foreign inflows either by raising unemployment or (again, more likely) by creating more household or fiscal debt.
6/6
Counterintuitive as it may at first seem, when foreigners export their excess savings to the US, or when rising income inequality causes rich Americans to save more, the total pool of savings available does not rise. Put differently, foreign inflows cancel themselves out.
Counterintuitive as it may at first seem, when foreigners export their excess savings to the US, or when rising income inequality causes rich Americans to save more, the total pool of savings available does not rise. Put differently, foreign inflows cancel themselves out.
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