The Good Bad News

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But by, in effect, importing about $400 billion in net investment this year, says Lindsey, the U.S. has become more dependent on foreign capital than at any time since 1896--or, says Wyss, since the 1860s. And if those overseas centimillionaires change their mind about the best place to invest, the U.S. would get hit with a double whammy. It would lose some of the investment that has been keeping the boom going, and the dollar's value would fall, raising the cost of imports and the many U.S. products that are assembled partly from imported components. Feldstein figures a 15% drop in the dollar's value would translate into a two-percentage-point increase in the U.S. inflation rate. That, he fears, would be enough to persuade the Fed to resume a policy of anti-inflation interest-rate hikes.

But if the worst threat anyone can conjure up arises from overseas, that in itself testifies to the economy's internal strength. Those foreign centimillionaires appear to have more potential to disrupt the economy than any foreseeable bungling by whoever wins the White House--and as the presidential race heats up, that may be another comforting, almost Panglossian, thought.