The Corner

Debtor Nation

From the Washington Times comes this eye-opener for a Monday morning:

As recently as 1996, America’s net debtor status was minus $456 billion. Since 1996, it has increased by more than $3 trillion, or 660 percent, as America’s 12-year cumulative trade deficit soared by $5.7 trillion.

Scary. Here’s more: Our net indebtedness spiked by well over a trillion bucks in a single year:

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.

The bottom line:

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. “Three decades of massive [trade] deficits have converted the United States from the world’s banker – able to ‘pay any price and bear any burden in the cause of freedom’ – to the world’s largest debtor, utterly dependent on China and other foreign interests,” said Charles McMillion, chief economist of Washington-based MBG Information Services.

The scariest part: Virtually all the statistics in this report reflect circumstances as of the end of 2008 — they do not factor in Obama.

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