In a strange twist of logic, the United States is sometimes referred to these days as a debtor nation, attended by all the negative implications that go with such a categorization.
The popularity of the debtor thesis arises mainly from statistics that show the value of foreign-held assets in the United States now exceeds the value of U.S. assets held abroad.The official figures verify the situation. In 1987, Americans were said to own $1.1 trillion of foreign assets, whereas foreigners were credited with owning about $1.5 trillion worth of the United States.
But, say critics of such thinking, so what!
Before lamenting the passing of a great financial power, the critics say, an application of reason might reveal that what is suggested as an American weakness may very well be strength instead.
Their contention is that foreigners should indeed be attracted to U.S. assets, since such assets are a solid investment piding a good return in the most politically stable large nation on earth.
In short: That foreign money isn't lent to desperate Americans so much as it is invested in attractive holdings. It isn't money begged to avert disaster; it is money attracted by good prospects and rates of return.
At any rate, says William K. MacReynolds of the U.S. Chamber of Commerce, the debtor nation idea does not "comport with accepted notions of what debtor status means."
He points out, for example, that a common definition of a debtor is that of an entity having negative net worth, owing more in liabilities than is owned in assets. Profligate as he is, Uncle Sam doesn't fit the definition.
MacReynolds comments that all U.S. assets, including corporate equity and bonds, government obligations, real estate, bank assets and more, amount to $30 trillion. Of that foreigners, owned but 5.6 percent.
He offers still another method of looking at the so-called burden: Compare it with a year's worth of income. By that test, he says, one year's U.S. income is more than enough to buy out all foreign assets owners at once.
That eventuality, of course, is implausible. More realistically, only a small portion of U.S. income, measured by gross national product, is needed to satisfy foreign asset holders in the form of an annual rate of return.
Remember, what is called debt is really investment. And investors, foreign and domestic, expect only a certain annual percentage - a rate of return - rather than the entire amount at once.
Besides, says MacReynolds, who is director of financial and monetary affairs for the chamber, even if the popular but spurious definition of debtor nation is used, the United States still might come out on top.
Officially, the United States held $1.1 trillion of foreign assets at the end of 1987, or considerably less than the estimated $1.5 trillion of U.S. assets held by foreigners.
But, says MacReynolds, something doesn't add up. He asks how it could be that U.S. investors abroad should earn $6 billion more than foreigners earned here.
His guess is that the total of foreign assets held by Americans is greatly undervalued. Rather than the reported $1.1 trillion, he says, such assets should be valued at more than $1.5 trillion.