How does the rest of the world interact with US financial markets?
Thursday, November 11th, 2010So I understand that the rest of the world makes payments to US households and firms through the goods market, and the rest of the world can be involved in our stock market, but can US companies and individuals borrow money from the rest of the world through financial markets? And what about vice versa?
In every way imaginable.
Foreign companies and government have bought out U.S. banks
http://www.blanchardonline.com/investing-news-blog/econ.php?article=305
http://www.econlib.org/library/Enc1/ForeignInvestmentintheUnitedStates.html
and have set up their own banks in the U.S. and vice versa (American banks have branches all around the world)
Foreign stocks are available on the U.S. markets through ADRs
http://en.wikipedia.org/wiki/American_Depositary_Receipt
and foreign investment mutual funds, and, now, through E-trade:
http://www.ehow.com/how_6597560_buy-foreign-shares.html
And vice versa (U.S. stocks can appear on foreign stock exchanges the same way)
Corporations (both U.S. and foreign) can issue bonds globally
http://www.businessweek.com/news/2010-09-15/bond-slump-masks-demand-as-yield-spreads-shrink-credit-markets.html
etc.