Debt: In the Red, White and Blue

The U.S. may be a rich nation, but it still lives way beyond its means. The Commerce Department reported last week that America had become the largest debtor in the world. Its net debt, meaning the difference in value between foreign holdings in the U.S. and American investments abroad, reached $107.4 billion in 1985. That figure put the U.S. ahead of Brazil ($94.1 billion) and Mexico ($93.1 billion). Japan, with net assets of $129.8 billion, became the world’s largest creditor nation in 1985 because of its huge, recurring trade surpluses.

Only five years ago the U.S. was on top, with a positive balance of $140.7 billion. But as the dollar steadily gained strength from 1981 to 1985, Americans began buying more and more imports, and the U.S. trade deficit hit a record $148.5 billion last year.