Selling furniture to pay the laundry bill | csmonitor.com

csmonitor.com, March 20, 2006:

"As of the final quarter of 2005, the deficit in the current account, a measure which includes the trade deficit in goods and services, net investment income, and other transfers (including remittances of immigrants), amounted to 7 percent of gross domestic product.

In relation to GDP, that's twice the level it was at the time of the drastic 1985 Plaza Accord.

What it means is that the US is purchasing about 7 percent more than it's producing. In effect, it needs to import about $2.5 billion in foreign capital every day to finance this deficit. America's net international investment deficit - how much the US owes to other nations - probably reached $3 trillion at the end of last year, estimates Scott. That's one-quarter of the gross domestic product.

Most of the current account deficit is financed by China, Japan, North Korea, and other nations buying US Treasury bonds and other American financial securities - paper assets. But foreigners are also using their dollars to buy American companies or invest in new plants and equipment. Last year those investments reached $128 billion.

The US is rapidly selling off its productive facilities. Foreigners now own 97 percent of sound recording industries, 65 percent of metal ore mining, 63 percent of book publishers, 51 percent of plastic product companies, 48 percent of glass and glass product businesses, 30 percent of chemical manufacturers, and so on through a list of dozens of industries, down to 20 percent of iron, steel mills, and steel products.

In a sense, that's the result of globalization and flourishing multinational firms. Other nations used to complain about US ownership of their businesses. The shoe is now on the other foot."

Bet you hadn't thought of North Korea as helping support our economy, had you?