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The United States in debt

Author

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  • Norman S. Fieleke

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.

Suggested Citation

  • Norman S. Fieleke, 1990. "The United States in debt," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 34-54.
  • Handle: RePEc:fip:fedbne:y:1990:i:sep:p:34-54
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    File URL: http://www.bostonfed.org/economic/neer/neer1990/neer590c.pdf
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    References listed on IDEAS

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    1. Feldstein, Martin & Elmendorf, Douglas W, 1990. "Government Debt, Government Spending, and Private Sector Behavior Revisited: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 589-599, June.
    2. John F. Helliwell, 1990. "Fiscal Policy and the External Deficit: Siblings, but not Twins," NBER Working Papers 3313, National Bureau of Economic Research, Inc.
    3. Modigliani, Franco & Sterling, Arlie G, 1990. "Government Debt, Government Spending, and Private Sector Behavior: A Further Comment," American Economic Review, American Economic Association, vol. 80(3), pages 600-603, June.
    4. Jeffrey H. Bergstrand, 1986. "United States-Japanese trade: predictions using selected economic models," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 26-37.
    5. Kormendi, Roger C & Meguire, Philip, 1990. "Government Debt, Government Spending, and Private Sector Behavior: Reply and Update," American Economic Review, American Economic Association, vol. 80(3), pages 604-617, June.
    6. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-125, May.
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