Quotation of the Day…
by Don Boudreaux
on March 11, 2017
… is from page 202 of the late Robert Bartley’s 1992 book, The Seven Fat Years:
It is especially important to remember that trade and investment accounts balance, there is no a priori way to tell which drives the other. The prevailing assumption is that Americans want to buy Toyotas, so they go out and borrow the money. But if the Japanese suddenly decided they wanted to invest in the U.S., the accounts would still have to balance. If Japanese funds came pouring in, the Americans would have to do something to get rid of the dollars, like buy Toyotas.
DBx: As noted in this earlier post, it is misleading to describe a trade deficit as being necessarily the result of, or as necessarily reflecting, a deficiency of domestic savings.
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