position resembles the peak levels reached immedia

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    Global: The Civil War and America's Debtor Status

    Joe Quinlan/Rebecca McCaughrin (New York)

    It has been a long time since America’s net external debt with the rest of the world has been so large. Indeed, approaching roughly 23% of GDP in 2001, America’s net international debt position resembles the peak levels reached immediately after the Civil War. Then, foreign borrowing to build canals and railroads to open the West drove the ratio of external debt to GNP to roughly 25%. By the end of the nineteenth century, however, the US was a capital exporter and emerged as a net creditor nation during World War I, a position it maintained until the 1980s.

    The US was the world’s largest creditor nation in 1981. Five years of current-account deficits later, the US became a net debtor nation. The net international investment position of the US swung to a negative $36 billion in 1986 based on current cost valuations; in the same year, the US remained a net creditor nation based on market value calculations. In 1989, though, the US became a massive debtor, with net external debt totaling $260 billion on a current cost basis and $47 billion based on market value. Since then, America has only burrowed deeper into the red.

    After averaging $268 billion over the 1990-96 period, the net debt position of the US widened dramatically along with the rising current-account deficits of the late 1990s. Ever enamored with the US -- the global growth and technology champion of the time -- foreign holdings of US assets jumped nearly 50% between 1997 and 2001, rising from $6.2 trillion in 1997 to roughly $9.2 trillion. To put the latter number into perspective, the gross stock of US assets held by overseas investors is now nearly equivalent to the total output of the US economy. Foreign assets held by US investors also surged over the 1990s, but not at the same pace as US assets accumulated by foreigners. US assets abroad totaled $6.8 trillion in 2001, leaving the US in debt to the rest of the world to the tune of $2.3

    taken from http://www.morganstanley.com/GEFdata/digests/latest-digest.html
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