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From Where do we get the savings to fund investment?

Discussion: From Where do we get the savings to fund investment?

This chart from the Federal Reserve in St. Louis
(Links to an external site.)
shows the US Personal Saving rate since 1960. It has been pretty volatile, between about 2.5 and 15%.
Here is the National Saving rate trend
(Links to an external site.)
, which is personal plus the federal budget balance (which in the US has been mostly negative since the mid-70s). Since 1960 it has mostly ranged between 2 and 12%, but was negative during the Great Depression & the Great Recession.
Here is a trend chart of US Gross and Net Private Domestic Investment
(Links to an external site.)
(Gross Domestic Investment equals “I” in GDP), which has been between 10 & 16% since 1960.
The difference between “I” and the sum of the previous two numbers (by definition) comes from an influx of foreign saving into the United States. This inflow is and must be exactly equal to the US trade deficit — that is where our foreign investment comes from. Here is that trend for the US in a document from the International Monetary Fund
(Links to an external site.)
So… Is it OK that a lot of US private investment is funded by foreign governments? How would we change it so that US citizens fund more US investment? (hints: a strong US economy and/or a strong US dollar makes the deficit BIGGER, not smaller, and larger government deficits make the trade deficit LARGER) Use external sources.


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