The United States in Debt
After 1982 the international investment position of the United States dramatically shifted from one of sizable net creditor to much more sizable net debtor. As the U.S. deficit on current international transactions soared to record levels during the mid-1980s, some observers perceived a grave loss of U.S. competitiveness that was "deindustrializing" America. Others warned of an imminent international financial crisis.
This article examines the growth of U.S. indebtedness to the rest of the world and its underlying causes, and considers the consequences and some proposed remedies. The author perceives no deindustrialization of America, nor does he foresee a crisis for the nation on its foreign indebtedness. Nevertheless, the indebtedness imposes a new burden on the U.S. economy, as the trade deficit must diminish if the nation is to fund increasing net interest payments to its creditors. The adjustment will not be painless for the United States, which will be obliged to consume less than it otherwise would.
About the Authors
Norman S. Fieleke
Resources
Related Content
Financial Market Implications of the Trade War between the United States and China
Nudging Credit Scores in the Field: The Effect of Text Reminders on Creditworthiness in the United States
The Credit Card Debt Puzzle: The Role of Preferences, Credit Risk, and Financial Literacy
Transparency in State Debt Disclosure