home > by publication type > council special reports > Sovereign Wealth and Sovereign Power
Email
| Author: | Brad W. Setser, Fellow for Geoeconomics |
|---|
September 2008
64 pages
ISBN 978-0-87609-415-0
$10.00
Council Special Report No. 37
Few issues fit that description more closely than the subject of this Council Special Report. America’s current account deficit is financed by foreign purchases of such assets as Treasury securities and stakes in U.S. firms. A good deal of these purchases today are made by the central banks and sovereign wealth funds of countries that do not share many American political values and foreign policy goals.
Some argue that this is no cause for concern. But Brad W. Setser makes a compelling case that the U.S. deficit matters for economic and strategic reasons alike. The United States may have more to lose than its creditors if they sell American assets or stop accumulating them at their current pace. This gives creditors potential leverage over U.S. policy. Setser also argues that indebtedness limits America’s ability to influence other countries’ policies, for example through sanctions and lending arrangements.
The problems associated with U.S. indebtedness cannot be addressed overnight. But the report proposes ways for the United States to guard against the effects of a disruption in foreign financing, such as consulting with allies who hold dollars and encouraging other creditor countries to spend and invest surpluses instead of accumulating reserves. It also suggests measures to reduce the need for financing in the first place, such as working to balance the U.S. budget and, most importantly, taking steps to reduce U.S. oil imports.
Sovereign Wealth and Sovereign Power raises the potential strategic implications of U.S. indebtedness, challenging the sanguine view that global economic interdependence guarantees prudence. The report is a significant contribution to the debate on America’s political and economic position in an age of globalization.
Brad W. Setser is a fellow for geoeconomics at the Council on Foreign Relations (CFR). He most recently was a senior economist for RGE Monitor, an online financial and economic information company. In 2003, he was an international affairs fellow at the Council, where he wrote, with Nouriel Roubini, Bailouts or Bail-Ins: Responding to Financial Crises in Emerging Markets (Peterson Institute), a book examining International Monetary Fund policy toward crises in emerging market economies.
Dr. Setser has also been a research associate at the Global Economic Governance Programme at University College, Oxford, and a visiting scholar at the IMF. He served in the U.S. Treasury from 1997 to 2001, where he worked extensively on the reform of the international financial architecture, sovereign debt restructurings, and U.S. policy toward the IMF. He ended his time at the Treasury as the acting director of the Office of International Monetary and Financial Policy.
Dr. Setser is a CFR term member. He earned a BA from Harvard University, a DEA from Institut d’Etudes Politiques de Paris, and MPhil and DPhil degrees from Oxford University.
In Restoring the Balance: A Middle East Strategy for the Next President, experts from the Council on Foreign Relations and the Saban Center at the Brookings Institution propose a new, nonpartisan Middle East strategy drawing on the lessons of past failures to address both the short-term and long-term challenges to U.S. interests.
This report lays out a thoughtful agenda for U.S. policy toward the Democratic Republic of Congo, arguing that what happens there should matter to the United States--for humanitarian reasons as well as economic and strategic ones.
In this report, CFR Senior Fellow Michael A. Levi analyzes the potential use of deterrence in preventing terrorist groups from acquiring nuclear weapons and recommends a new approach to U.S. declaratory policy, as well as ways to improve U.S. capabilities to determine the sources of terrorist attacks.
Complete list of Council Special Reports.
This report argues that the United States must lead with domestic action on climate change and proposes a U.S. negotiating strategy for a global UN climate agreement that includes commitments from all major economies, while also promoting a less formal Partnership for Climate Cooperation that would focus the world's largest emitters on implementing aggressive emissions reductions.
This Task Force report examines changes in Latin America and in U.S. influence there, while taking account of the region's enduring importance to the United States. The Task Force offers an agenda for U.S. policy toward Latin America and identifies four critical areas that should provide the basis of a new U.S. approach.
About Independent Task Forces at CFR.
A selection of Foreign Affairs pieces by and about the preeminent political scientist of the last half century.
To order Task Force reports, Council Special Reports, and Critical Policy Choices, please call, fax, or order online from our distributor, the Brookings Institution Press: phone +1.800.537.5487, fax +1.410.516.6998.
For information on other reports that are not for sale, or for general publications information, please call +1-212-434-9516 or email publications@cfr.org.
To request permission to reuse Council materials, please email publications@cfr.org or fax +1.212.434.9859.
Please include the complete information of the requested work—author, title, sections/pages to be copied or reprinted, and number of copies to be made—along with a brief description of where and how you would like to reuse the work.
You may also request permission for Council material through Copyright Clearance Center. For more information, please click on the link below.
Copyright 2009 by the Council on Foreign Relations. All Rights Reserved.
Global Economy 