Beware of Misleading Terms
25 September 2006
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
There might (or might not) be good reason to worry about the fact that now "the U.S. is paying noticeably more to its foreign creditors than it receives from its investments abroad" ("U.S. Foreign Debt Shows Its Teeth As Rates Climb," September 25). But this issue is clouded with misimpressions that fuel unnecessary concern.
Specifically, only because of the peculiar definitions used in international commercial accounting are you correct to write that "the nation's total foreign debt [includes] the value of all the U.S. stocks, bonds, real estate, businesses and other assets owned by non-U.S. residents." In fact, though, foreign owners of shares of Google or of tracts of land in Nevada or of a factory in Alabama are not creditors of Americans. Americans owe such foreigners nothing. To classify these foreign holdings as American debt ignites all manner of pointless fretting – and, worse, protectionist pressures.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
Dear Editor:
There might (or might not) be good reason to worry about the fact that now "the U.S. is paying noticeably more to its foreign creditors than it receives from its investments abroad" ("U.S. Foreign Debt Shows Its Teeth As Rates Climb," September 25). But this issue is clouded with misimpressions that fuel unnecessary concern.
Specifically, only because of the peculiar definitions used in international commercial accounting are you correct to write that "the nation's total foreign debt [includes] the value of all the U.S. stocks, bonds, real estate, businesses and other assets owned by non-U.S. residents." In fact, though, foreign owners of shares of Google or of tracts of land in Nevada or of a factory in Alabama are not creditors of Americans. Americans owe such foreigners nothing. To classify these foreign holdings as American debt ignites all manner of pointless fretting – and, worse, protectionist pressures.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Monday May 28, 2007 at 7:53am