Journal Article

The United States in debt


Abstract: 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.

Keywords: Balance of payments; Debts, Public; International economic relations; Budget deficits;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: New England Economic Review

Publication Date: 1990

Issue: Sep

Pages: 34-54