Re: [OPE-L] Crashes, adjustment, and the long-run

[Jerry Levy <Gerald_A_Levy@xxxxxxx>]

Hi Paul C,

 

> To answer with another question:

> How many years would it take at the current rate of deficit

> for the entire fixed capital stock of the USA to pass into the

> hands of overseas investors?

 

I assume you mean 'at the current rate of change'? 

 

> Would this point not act as a limit?

 

Why?

 

The issue isn't how long it would take for the fixed capital

stock to become fully owned abroad. The issue is, if you

are projecting a crash in the long-run, how long is the

long-run? 

 

Also, I don't see any reason to necessarily believe that

foreign ownership of the fixed capital stock in the US would

cause a crash in the US.  Indeed, a contrary argument could

made: if the fixed capital stock becomes fully owned by

investors abroad, then those investors have an increased

incentive to prop up the US economy -- they have more to

lose by a collapse.  If firms based out of the US declare

bankruptcy in a crash that can't be good for their foreign

investors.

 

In solidarity, Jerry