Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
... measure "financial investment" flows between countries, when considering the question raised here?

The direct question is whether there are net real benefits of economic relations to both parties, and international financial investment is not established as a plausible means for providing net real benefits to both countries.

Indeed, if there was balanced trade, which is a pre-requisite of Ricardo's model, there is no substantial opportunity for net flows of financial capital, and no need to pay a tribute in blood and treasure in return for prior receipts of financial capital.

So the main job of measuring flows of "investment" in financial terms is to indicate how far the international relations between the countries are from conditions in which mutually beneficial trade is one plausible outcome.

Obviously we have to be on guard against the semantic confusion that people and organizations holding wealth constantly rely on, the confusion between "financial investment" and "economic investment". "Investment" in economic terms ... acquisition of newly produced goods and services used to expand productive capacity ... is not in the capital account ... it is in the trade account.

And the point of financial "investment" is not to increase the amount of economic investment that takes place, but rather to place a financial claim on the product of the economic investment that takes place.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jul 20th, 2008 at 01:49:18 PM EST
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