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United States as a Debtor Nation
Book Data
September 2005
ISBN Paper 0-88132-399-3
323 pp.

News Release



The United States as a Debtor Nation

by William R. Cline

"The most thorough and up-to-date look at the issue. . . It is to be hoped that someone with influence in Washington is paying attention."

Clive Crook in The National Journal

“. . . a splendid book that synthesizes all the core issues . . . It is an unusually thorough and thoughtful piece of policy analysis, and it will enjoy wide circulation and will become even more relevant as the problems it predicts emerge.”

Kenneth Rogoff, Harvard University, and former chief economist of the International Monetary Fund

“. . . an extremely useful resource, not only for people seeking to learn about the US trade deficit and related external borrowing, but also for people who are familiar with these important issues and need an accessible reference.

Kristin Forbes, Massachusetts Institute of Technology, and former member of President George W. Bush’s Council of Economic Advisers

“. . . a very fine piece of work, clarifying any number of paradoxes and showing the reader how to work through the issues.”

Edward M. Gramlich, Richard Musgrave Professor, University of Michigan


The United States has once again entered into a period of large external imbalances. This time the current account deficit, at nearly 6 percent of GDP in 2004, is much larger than in the last episode, when the deficit peaked at about 3.5 percent of GDP in 1987. Moreover, the deficit is on track to become substantially larger over the next several years. This study examines whether the large and growing current account deficit is a problem, and if so, how the problem can be solved. A central policy conclusion of this study is that it is increasingly important that the United States reduce its external current account deficit. This deficit is no longer benign as it arguably was in the late 1990s when it was financing high investment instead of high consumption and large government dissaving.

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In Brief

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1. The International Debt Cycle and the United States as an External Debtor

2. Valuation Effects, Asymmetric Returns, and Economic Net Foreign Assets

3. Projecting the US Current Account Deficit and Net Foreign Assets

4. US Fiscal Imbalance and the External Deficit

5. Sustainability of the US Current Account Deficit and the Risk of Crisis

6. Impact of the US External Imbalance on the Rest of the World

7. Principal Findings and Policy Implications