U.S.’s debtor status worsens dramatically (1)
In the midst of the longest, and probably deepest, postwar recession last year, the U.S. investment position with the rest of the world sharply deteriorated.
At the end of 2008, America’s net international investment position was minus $3.47 trillion, the Commerce Department reported Friday. That represents the difference between the value of U.S. assets owned by foreigners ($23.36 trillion) and the value of foreign assets owned by Americans ($19.89 trillion).
At the end of 2007, the U.S. net international investment position was minus $2.14 trillion. Thus, America’s net indebtedness with the rest of the world increased by $1.33 trillion, or 62 percent, during 2008. It was by far the biggest annual increase in data that go back to 1976.
Foreigners now hold nearly 50 percent of the federal government’s publicly held debt. If foreign investors significantly reduce their purchase of future U.S. Treasury debt securities, without even dumping their current holdings, U.S. interest rates could soar and the dollar could collapse, analysts fear.
At minus $3.47 trillion, America’s net debtor status with foreigners represents nearly 25 percent of U.S. gross domestic product, the highest level in history.
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