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Is it better to be a borrower (like the United States) or a lender (like the euro zone)?
The United States has a structural external deficit, so it is a structural borrower from the rest of the world. Since the crisis, the euro zone has built up a structural external surplus, so it is structurally a lender. Is it better to be a borrowing country (like the United States) or a lending country (like the euro zone)? The borrowing country is able to have a higher investment rate and therefore higher long-term growth than the lending country. This is confirmed by a comparison between the United States and the euro zone; But the risk for the borrowing country is the potential for a crisis caused by excessive external debt: a balance-of-payments or a currency crisis. But given the status of the dollar and the euro as reserve currencies, is this really a risk for the United States and the euro zone? If this risk does not exist, then the United States has the better strategy. Indeed, the United States has not had a balance-of-payments crisis in 40 years despite its chronic external deficit.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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