As the world is seized with anxiety in the face of a spreading financial crisis, the one place having a considerably easier time attracting money is, perversely enough, the same place that started much of the trouble: the United States.
American investors are ditching foreign ventures and bringing their dollars home, entrusting them to the supposed bedrock safety of U.S. government bonds. And China continues to buy staggering quantities of American debt.
These actions are strengthening the dollar and giving the Obama administration a crucial infusion of financing as it directs trillions toward rescuing banks and stimulating the economy, enabling the government to pay for these efforts without lifting interest rates.
And yet in a global economy beset by a crippling lack of confidence and capital, the tilt of money toward the United States appears to be exacerbating the crisis elsewhere.
A dollar invested by foreign central banks and investors in U.S. government bonds is a dollar not available to Eastern European countries desperately seeking to refinance debt. It is a dollar that cannot reach Africa, where many countries are struggling with the loss of aid and foreign investment.
"Virtually all of the low-income countries are in very serious trouble," said Eswar Prasad, a former official at the International Monetary Fund and a senior fellow at the Brookings Institution, the liberal-leaning research organization in Washington, D.C.
"This is the third wave of the financial crisis," he said. "Low-income countries are getting hit very hard. The flow of private capital to the emerging market has dried up."
Private money invested in so-called emerging countries plunged from $928 billion in 2007 to $466 billion last year and is likely to fall to $165 billion this year, according to the Institute of International Finance.
As Americans eschew foreign deals and keep their dollars at home, and as foreign central banks — especially China — buy Treasury bills, the United States is absorbing money that used to be scattered around the globe.
And that is making money more scarce elsewhere in the world.
The most immediate crisis appears to be in Eastern Europe, where investors borrowed exuberantly in foreign currencies — notably the euro and the Swiss franc — using those funds to build office towers and factories.
Their debts are growing as their currencies decline in value, leading to bank losses and requiring government bailouts along with aid from the International Monetary Fund.
Ukraine's economy is shrinking after nine years of growth as the global crisis cuts access to credit and investment. Prices of commodities, including the former Soviet state's major exports such as grains and industrial metals, have collapsed and economic turmoil has been aggravated by a political struggle between President Viktor Yushchenko and Prime Minister Yulia Timoshenko over policies needed to meet terms of an international bailout.
Ukraine was forced to turn to the International Monetary Fund for help to avoid a default, stabilize the banking system and aid its currency.
Economists liken this episode to the financial crisis that assaulted much of Asia in the late 1990s.
Then, as now, investors borrowed in foreign currencies. When investment exited the region, local currencies plummeted, particularly in Thailand and Indonesia, setting off a wave of defaults and sowing unemployment and poverty.
"Eastern Europe looks incredibly similar to Asia in the 1990s," said Brad Setser, an economist at the Council on Foreign Relations in New York.
In the 1990s, the rest of the global economy was growing vigorously. Once danger abated, Asian countries were able to resume growth by selling goods to the United States, Europe, Japan and China.
Indeed, the very plunge in currencies that precipitated the crisis also provided a fix, making Thai, Malaysian, Indonesian and Korean goods that much cheaper on world markets.
This time, as many low-income countries again see their currencies fall, they are confronting a world beset by recession, in which demand for their products is weak and falling.
In a report released Sunday, the World Bank predicted the global economy would shrink in 2009 for the first time in more than half a century and forecast that global trade would decline for the first time since the early 1980s.
"Depreciation isn't enough now to offset the global contraction," said Setser, noting that export powers like Japan, South Korea, Taiwan and Brazil have had rapid declines in sales in recent months.
"Everybody's looking vulnerable. All commodity exporters are potentially subject to currency crises."
Fears are growing that a much broader group of countries will plunge into trouble. Prasad's list includes Vietnam, the Philippines, Malaysia and Indonesia, as well as Pakistan and Ecuador.
Because worries are deeper nearly everywhere else, the United States and the dollar have essentially benefited from the worldwide panic.
In the last year, the dollar has risen 13 percent against major foreign currencies after adjusting for inflation, according to Federal Reserve data. Foreign holdings of Treasury bills increased by $456 billion in 2008.
"It's a huge safe haven effect," said William Cline, a senior fellow at the Peterson Institute for International Economics in Washington.
"The basic assumption that people are making is that the U.S. government will never default on its debt."
Information about Ukraine is from Bloomberg News.
