I’ve heard people say that the US has gone from being the world’s largest creditor nation to the world’s largest debtor nation. Can someone define this for me? Does our 13.6 trillion debt include any loans we’ve got owed to us? For example do we owe 15 trillion but have 1.4 out in loans so the net is 13.4 trillion? Or do we actually owe 13.4 trillion and our credits are separate.
Suppose country X borrows 100 trillion but also loans out 100 trillion. Are they the world’s largest debtor and creditor simultaneously? Or is their debt considered to be 0?
The reason I’m wondering about this is that I’ve heard Japan is a creditor nation yet they have a large amount of debt. I would think the important stat is your combined balance not debits and credits listed separately.
In absolute terms. Not even close in terms of % of GDP. The Federal Reserve has foreign sovereign debts on its books, but it doesn’t reach anywhere near the Treasury debt. I don’t even know what a “creditor nation” would be. No state has a positive balance.
WWGAAPsS: What Would Generally Accepted Accounting Principals Say?
Assets = Liabilities + Owners Equity
So say the USA is a corporation or individual and has borrowed 14 trillion and has loaned out 5 trillion. So the balance sheet would say:
The 5 trillion receivable is an ASSET and the 14 trillion debt is a liability and are completely different in the eyes of the GAAPs. (Unless you are a fractional reserve bank or a government of course.)
So that 14 trillion is a debt regardless of what assets are on the other side of that blance sheet.
This is logically correct as the lender of the 14 trillion say China may not want 5 trillion in Mexican Loans in lieu of 5 trillion in cash.
The United States is a “debtor” nation in the sense that it gets more foreign investment than any country in the world.
It was derided by playwright Gore Vidal as an inferior status (“In 1982, America became a debtor nation. That’s the year the American Empire died”), because of the bizzaro world thinking that foreigners investing their money into the hands of people of your very own country is an act of imperialism by them. People have the strange notion that it is investors from rich nations that invest in poor ones, when it is actually the other way round - top Asian companies prefer to acquire holdings in US than invest in their own poor countries - but it’s ridiculously seen as a poor world status.
This is interesting to me is because I believe the US is soon going to print money not because it wants to, but because it has to (to pay its debts). I’ve been mainly using national debt to see how bad a country’s financial shape is. I’m thinking that the balance sheet may be more accurate.