AMERICAN BONDS ARE ATTRACTIVE.

AMERICAN BONDS ARE ATTRACTIVE. David Malpass, Bear Stearns’s chief economist, has a wonderful article in the Wall Street Journal for Thursday December 21, which reminds people of this. The article has a detailed analysis of foreign demand for American investments, but I limit myself to this simple hobby horse for my target audience (my family). It is still common in the press to speak as if the United States imported too many goods and services and left the trade deficit as a residual. Discussions of “global imbalances” often do not mention the fact that American debt instruments are attractive. We take it for granted that portfolios in the United States and the balance sheets of American companies include American debt. And yet, people speak of foreign holders of American debt as if they were stuck with the Old Maid in a child’s card game. Most American one hundred dollar bills are held abroad. American bonds are attractive to foreigners for some of the same reasons.