"The only way that we can reduce our financial dependence on the inflow of funds from the rest of the world is to reduce our trade deficit"
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Feldstein’s line has the clean, almost moral geometry economists love: if you don’t want to live on other people’s money, stop spending more abroad than you earn. It’s not a slogan about thrift so much as a reminder that national accounts are constraints, not vibes. A trade deficit isn’t just an abstraction about ports and containers; it is, in the balance-of-payments identity, the mirror image of net capital inflows. If Americans buy more from the world than they sell to it, foreigners must, by definition, finance the gap by buying US assets or lending into US markets. “Financial dependence” is his deliberately loaded phrasing for what many policymakers prefer to call “attracting investment.”
The intent is corrective and political. Feldstein is warning an audience tempted by magical thinking that you can keep the comforts of a deficit while escaping its counterpart: reliance on external funding. The subtext is a critique of complacency during periods when the dollar’s reserve status and deep US capital markets make foreign financing feel painless. He’s nudging readers to notice the vulnerability hidden inside that privilege: shifts in global appetite for US assets can force painful adjustment, and persistent deficits can erode manufacturing capacity, bargaining power, and policy autonomy.
Context matters because Feldstein wrote and advised through decades of ballooning US current-account deficits, especially from the 1980s onward, when “globalization” became an alibi for imbalances. His formulation is almost prosecutorial: if you want less dependence, you don’t get to change the label; you have to change the arithmetic. The provocation is that the fix is domestic: raise national saving, curb consumption binges, or accept a weaker dollar and different patterns of investment.
The intent is corrective and political. Feldstein is warning an audience tempted by magical thinking that you can keep the comforts of a deficit while escaping its counterpart: reliance on external funding. The subtext is a critique of complacency during periods when the dollar’s reserve status and deep US capital markets make foreign financing feel painless. He’s nudging readers to notice the vulnerability hidden inside that privilege: shifts in global appetite for US assets can force painful adjustment, and persistent deficits can erode manufacturing capacity, bargaining power, and policy autonomy.
Context matters because Feldstein wrote and advised through decades of ballooning US current-account deficits, especially from the 1980s onward, when “globalization” became an alibi for imbalances. His formulation is almost prosecutorial: if you want less dependence, you don’t get to change the label; you have to change the arithmetic. The provocation is that the fix is domestic: raise national saving, curb consumption binges, or accept a weaker dollar and different patterns of investment.
Quote Details
| Topic | Money |
|---|---|
| Source | Help us find the source |
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