"Unless the trade deficit shrinks, the combination of the trade deficit and the interest and dividend payments to foreigners will grow ever more rapidly"
About this Quote
That sentence is Feldstein doing what he often did best: turning a bland macroeconomic term into a political alarm bell. A “trade deficit” sounds like a scoreboard statistic; Feldstein yanks it into the real world of power and dependency by pairing it with “interest and dividend payments to foreigners.” The move is deliberate. He’s not just worried about imports exceeding exports. He’s worried about what happens after years of borrowing to finance that gap: the country doesn’t merely buy more than it sells; it also starts owing a growing stream of income to whoever financed the difference.
The intent is to reframe the conversation from a one-year flow (the trade deficit) to a compounding stock problem (foreign claims on domestic assets). “Will grow ever more rapidly” is the rhetorical fuse. Feldstein is invoking a feedback loop: deficits require financing; financing accumulates liabilities; liabilities generate payments; payments worsen the overall external balance, pushing the system toward more borrowing. It’s economic language, but the subtext is geopolitical: a nation that must continually send checks abroad has less room to maneuver at home, and its “independence” becomes quietly conditional.
Context matters. Feldstein came out of an era when U.S. current account deficits widened and foreign capital flowed into American markets, prompting fierce debates about whether the U.S. was living beyond its means or simply serving as the world’s safe asset. His warning sides with the former camp, casting complacency as the true risk: not collapse tomorrow, but a slow ratchet of obligations that becomes harder to reverse the longer it runs.
The intent is to reframe the conversation from a one-year flow (the trade deficit) to a compounding stock problem (foreign claims on domestic assets). “Will grow ever more rapidly” is the rhetorical fuse. Feldstein is invoking a feedback loop: deficits require financing; financing accumulates liabilities; liabilities generate payments; payments worsen the overall external balance, pushing the system toward more borrowing. It’s economic language, but the subtext is geopolitical: a nation that must continually send checks abroad has less room to maneuver at home, and its “independence” becomes quietly conditional.
Context matters. Feldstein came out of an era when U.S. current account deficits widened and foreign capital flowed into American markets, prompting fierce debates about whether the U.S. was living beyond its means or simply serving as the world’s safe asset. His warning sides with the former camp, casting complacency as the true risk: not collapse tomorrow, but a slow ratchet of obligations that becomes harder to reverse the longer it runs.
Quote Details
| Topic | Money |
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