Question

In “The Choice,” Ed says “I can see why people were worried about Japanese purchases of American assets. The Japanese earn all of the profits instead of the Americans who owned it before.” According to Dave in “The Choice,” what is wrong with that logic?

Answer 1

When the Japanese are purchasing American assets today, it is not a thing of worry for the Americans because Japanese purchase of the American assets is leading to net inflow of capital in the America and thus building up the surplus in the capital account and thus Balance of Payment account which is good for the economy as a whole. Also, it has been observed that Americans are mainly selling loss making assets to Japanese. Also, the Americans have lots of assets in their hand and selling of loss making assets to Japanese and this is also strengthening the capital base of the US. Thus, the logic given is not correct.