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March 14, 2002
" . . . the current account imbalance last year remained at the second highest level on record. It is expected to show only a slight further improvement this year, something that has many economists worried. To finance this trade deficit, the United States must depend on foreigners' willingness to exchange their cars, crude oil and other products for American dollars, which return to the United States in various investments from stocks and bonds to purchases of American real estate and factories. . . . Greenspan said in a speech Wednesday that it would unrealistic to expect foreign investment to stay at the high levels of recent years for a prolonged period. He said the best way to shrink the current account deficit would be for Americans to increase their record-low savings rate . . . The concern is that at some point foreigners will decide to pull their investments out of the United States, triggering a decline in the value of the U.S. dollar, depressing the value of American stocks and bonds, sending U.S. interest rates prices soaring." ... [more]
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