Informant38

deepest debtor
Thanks to President George Bush�s $600bn budget deficit (although he actually inherited a surplus from Bill Clinton), a persistent trade deficit with Asia and near zero savings rates, US net debt is growing, requiring daily inflows of billions of foreign-sourced dollars to cover the difference. These public and private flows are invested in sovereign debt instruments or the equity markets. As the US Federal Reserve noted in its latest quarterly report, foreigners now own 38% of US Treasury securities, more than twice the amount a decade ago.

This means that the US has mobilised an ever-greater share of world savings to finance US consumption, economic growth, living standards and military expansion. Most of those savings are from East Asia. Japan, China, the newly-industrialised countries and middle-income countries, such as Thailand, have accumulated vast resources that are not locally consumed or used for productive purposes but invested in dollar paper assets. Flows into these assets keep US interest rates low and boost the value of the dollar, allowing the US to import cheaply from the rest of the world. East Asia finances US debt in return for continued unrestricted access to the US market. This arrangement suits Asian exporters but inhibits the use of resources in other ways.
�Philip S Golub/Le Monde diplomatique Oct. 2003