Global Finance After the Crisis

Global Finance After the Crisis

The United States, China and the New World Order

Richard A. Iley and Mervyn K. Lewis

This thought-provoking book addresses challenging questions raised in light of the aftermath of the global financial crisis that saw an accelerated rise in the economic growth of China and other emerging market economies, while the US, Japan and Europe have laboured under the great recession.

Chapter 7: The US external position

Richard A. Iley and Mervyn K. Lewis

Subjects: economics and finance, financial economics and regulation, international economics, money and banking


Except for a brief respite in 1991, the US current account has been in deficit since 1983. After 1991 the deficit widened dramatically to peak at $800 billion (5.9 per cent of GDP) in 2006. By 2011, the deficit had fallen back to $466 billion (3.0 per cent of GDP). The course of the US current account deficit since 1960 was shown above in Figure 3.1 (p. 44 above). Figure 7.1 shows the recorded US net international investment position (NIIP) which follows the path of the current account deficit, moving from a situation where the United States had net foreign assets early in the 1980s to one today where there are substantial net foreign liabilities; indeed, the United States is by far the largest debtor country in the world, with a net external debt (that is negative NIIP) of $4 trillion, or 26 per cent of GDP. Other countries may (presently) have a larger external debt relative to GDP, but the persistence and absolute size of the US external position sets it apart from any other country.

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