Will This Misunderstanding EVER Disappear?
28 July 2006
Editor, The Baltimore Sun
Dear Editor:
Victor Davis Hanson commits the too-common mistake of assuming that all dollar-denominated assets held by foreigners represent American debt ("Don't think good times will last forever," July 28). But when foreigners hold dollars, when they build factories here, when they buy real-estate in America, and when they purchase shares of equity in the likes of GE or Google, they acquire American assets without creating a cent more of American indebtedness.
And in fact, foreigners lately are buying not so much American debt (such as U.S. Treasury bills) but, instead, stock in U.S. corporations. During the past twelve months they've increased their net holdings of such equities by $125 billion. These purchases lower the cost of capital for American companies as well as signal global confidence in the future of the U.S. economy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Baltimore Sun
Dear Editor:
Victor Davis Hanson commits the too-common mistake of assuming that all dollar-denominated assets held by foreigners represent American debt ("Don't think good times will last forever," July 28). But when foreigners hold dollars, when they build factories here, when they buy real-estate in America, and when they purchase shares of equity in the likes of GE or Google, they acquire American assets without creating a cent more of American indebtedness.
And in fact, foreigners lately are buying not so much American debt (such as U.S. Treasury bills) but, instead, stock in U.S. corporations. During the past twelve months they've increased their net holdings of such equities by $125 billion. These purchases lower the cost of capital for American companies as well as signal global confidence in the future of the U.S. economy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Sunday April 22, 2007 at 6:03pm