4 thoughts on “Why is the U.S. Borrowing Less?”

  1. My only mild quibble with the discussion is its one-sided nature – solely the demand for foreign capital. Surely the supply of foreign capital has shrunk on its own, which has likely led to some of the observed decrease in demand (increased private saving and decreased investment). Yet the discussion reads as if there’s an unbounded supply of capital at current rates and Americans are calling all the shots.

  2. @D. Watson. Good point. The primary message of my post is pure accounting: Q. How can the government borrow more, yet the country borrow less? A. Americans save more and invest less. As you note, the underlying drivers of this could, in principle be any combination of demand-side or supply-side factors. It might be that foreign capital dried up, for example, so increased government borrowing is, in essence, crowding out private consumption and investment. My guess is that demand-side factors predominant over the period in question — with Americans consciously choosing to save more and invest less because of what they see in the domestic economy — but supply-side factors were undoubtedly at work as well. Thanks.

  3. I agree that you have to look at both sides of the equation. We are borrowing less because we are importing less. We are importing less because we are borrowing less…

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