Ulhas:
> Thanks for replying. One more question, if you don't mind.
> How the US can
> have a capital-account surplus despite low interest rates?
during the late 1990s, the reason was that the US stock market was so attractive, while the US seen as a safe haven. The so-called "new economy" was seen as a miracle and people wanted to join, despite low interest rates on bonds and the like (even then). Moneyed folks put their cash in direct investment and in equities, which at the time offered much higher returns.
Nowadays, the capital-account surplus is in many ways just a hangover of that of the 1990s -- and thus likely to go away. But the US still has the "safe haven" cachet, since when the US comes down with a cold, the world gets the flu or pneumonia. (Mixed metaphor alert!) Further, the US government and its Fed have more power to deal with recessions and the like than do the vast majority of other countries.
JD
