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December 10, 1990
"Making of a Debtor"
San Jose Mercury News
By Timothy Taylor
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THE 1980s were a decade when global capital markets began to tie the world economy into a single package.

As the 1990s begin, America owns more of the rest of the world than it ever has before. U.S. assets abroad grew rapidly through the 1980s, roughly doubling from 1981 to 1989. But foreign assets in the United States grew even more rapidly, more than tripling since 1981. In 1985, when the two lines on the graph at right cross, the value of U.S. assets owned by foreigners begins to exceed the value of foreign assets owned by Americans. In short, the United States became a debtor nation.

U.S. assets abroad consist of many items: investments by U.S. citizens and companies in foreign stocks and bonds; direct ownership of companies and land; loans and moneys owed to U.S. banks by foreigners; U.S. government assets being held abroad; and more. Similarly, foreign assets in the United States include ownership of U.S. stocks and bonds, direct ownership of U.S. companies and land, foreign holdings of U.S. government debt and the amounts that U.S. borrowers owe foreign banks.

Obviously, collecting and compiling this sort of data is a messy business, but no measurement error is going to reverse the basic trend: The United States is plunging more deeply into debt every year.

Since 1984, the American economy has assumed an average of $130 billion of additional foreign debt each year. If that trend continues through 1992 -- and there's no good reason why it won't continue -- the U.S. economy will be toting around $1 trillion in foreign indebtedness.

That works out to an average of $4,000 in foreign debt owed by every man, woman and child in the United States, all 250 million of us.

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