The Forgotten Deficit: America's Addiction To Foreign Capital

The United States is the world's largest debtor nation. An often-overlooked element of the deficit, U.S. capital accounts, is the focus of this critical analysis. The evidence shows that the inflow of foreign money to finance U.S. consumption is going into short- and medium-term, interest-rate-sensitive, liquid instruments. U.S. debt instruments, rather than equities, are the asset of choice.

The authors argue that over the long term this trend will adversely affect the U.S. economy, as ever...