DeLong vs. Kling
By Arnold Kling
The only answer I can think of is for the U.S. to then become the world’s largest private-equity fund: they lend us their money, and we then invest the money back in their economies–in industries and companies that then have a very high demand for U.S. high-tech goods and for U.S. services exports.
The best of all possible worlds would be a huge shift in capital flows, with the U.S. doing more of the world’s saving and other countries becoming more reliable places to invest. We would earn high returns building up capital in India, China, and the developing countries. They would increase their demand for our goods and services.
Usually, we’re farther apart than that.