Don't care about World Opinion? What about their $$$??

[GTR_driver]

http://www.nytimes.com/2004/10/19/bu...er=rssuserland

Foreign investment in the US is declining. It may not be opinions that makes the world go round but we all know that money sure does!!

[YogsVR4]

I don't know how much you understand macro economics, but running a 3.5% GDP defecit won't damage the economy. Having foreign investors put there money someplace else will drive down the value of the dollar which makes exports dollars go up in which case the trade defecit gets decreases which offsets much of the investment shift.

The two things that could hurt the economy are a complete dry up of foreign capitol and the selling of all debt bonds. Neither are remotely likely to occur. Why would investors turn away from the most dynamic economy on the planet? Out of spite? Investments are rarely influenced by the current resident of the white house. And any major investor that works that way won't have any customers for long. Selling of all debt bonds means the purchasers would take a loss on their purchase. Why would you buy something and then sell it at a loss?

Inflation and savings are the key forces behind the low interest rates we've seen. There is not enough savings going on and thats something that individuals shoud get better at. However, as interest rates rise, savings does increase (which then help to drive down interest rates). Inflation is harder to predict or plan for. External forces play a large part on that. Having China deflate the Yuan against the dollar and Japan selling off the Yen to improve exports has delayed inflation forces for many years. Its a cause and effect - as long as those countries (as well as Korea and Tawian) rely on exports for their growth, they'll continue to supress their money against the dollar (and the euro).

The real issue is the natural expansion and contraction of the economy. It has its own life cycles. As long as the population continues to grow, more economies enter the world stage and global commerce continues to expand, fluctuations in inflation and interest rates are going to happen. Both of those things effect the ability of companies to expand (or even stay in business) which effects jobs and income growth.

No economist can fully predict what will happen. All they do is build scenarios and sooner or later one of them will be right.