ABSTRACT
There are essentially two issues central to the discussion of capital flows into the United States. The first, caused by the US economy’s inability to generate enough private savings to offset the Federal deficit, is the growing reliance of the US economy on foreign capital. The US Government mast be held accountable, both for this deficit and for the relatively low rate of savings in the private sector. The United States then would be forced to curtail its extensive presence overseas, as the British did in the 1960s when it pulled back from its “East of Suez” caimitments. The second issue concerns the volatility of capital flows. Billions of dollars can be sent out of a country before it has the chance to respond. To reduce this volatility, the Government should work to remove the imbalances that spur capital flows.
