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by Norman S. Fieleke
September/October 1990
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.
Full-text article 
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