Warning: I Am Not the Nobel Laureate
3 October 2006
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Two errors infect Joseph Stiglitz's claim that "the United States borrows close to $3 billion a day" ("How to Fix the Global Economy," October 3). First, this figure - annually about $1 trillion - obviously is the sum of both the U.S. trade deficit and Uncle Sam's budget deficit. But insofar as the trade deficit increases because foreigners lend money to Washington, Stiglitz is double-counting.
Second, the trade deficit is not all debt. Indeed, as Floyd Norris reported in your pages on July 22, "a substantial portion" of recent foreign investment in the U.S. is in corporate equity. U.S. equity investments by foreigners - along with their U.S. real-estate purchases and dollar holdings - increase the U.S. trade deficit but do not increase Americans' indebtedness.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
The Editor, New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
Two errors infect Joseph Stiglitz's claim that "the United States borrows close to $3 billion a day" ("How to Fix the Global Economy," October 3). First, this figure - annually about $1 trillion - obviously is the sum of both the U.S. trade deficit and Uncle Sam's budget deficit. But insofar as the trade deficit increases because foreigners lend money to Washington, Stiglitz is double-counting.
Second, the trade deficit is not all debt. Indeed, as Floyd Norris reported in your pages on July 22, "a substantial portion" of recent foreign investment in the U.S. is in corporate equity. U.S. equity investments by foreigners - along with their U.S. real-estate purchases and dollar holdings - increase the U.S. trade deficit but do not increase Americans' indebtedness.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Posted by Don Boudreaux on
Wednesday May 30, 2007 at 2:31pm