(My Thanks to Brad Delong for the link: http://www.stern.nyu.edu/globalmacro/Roubini-Setser-US-External-Imbalances.pdf)
Roubini and Setser have provided a very good Study of the Trade Deficit, Current Acounts balances, and the Net Debt entered into by the United States since 1997 when the U.S. net international investment position (NIIP) stood at a negative (-$360) billion. It has grown to a negative (-$2.65) trillion by the end of 2003. It is estimated to become a negative (-$3.3) trillion by the end of 2004. NIIP debt stood at 5% of GDP in 1997, and had grown to 24% of GDP by the end of 2003. It is expected to be 28% of GDP by the end of 2004.
These Authors point out the real difficulty in the American payment of these external liabilities remains the large amount of Imports v. a much smaller volume of American Exports. They express an estimate that current U.S. spending demand Japan and China absorb an additional $350 billion in U.S. Treasuries per year over the next four years, if it continues at the current level of increase. Methods of repayment of U.S. external debt entail the creation of a Trade suplus, or equilavent, while Imports continue to increase over Exports both in real and Currency terms. They also express the complications of a Dollar devaluation, or the increase of Interest rates to gain subscription of the debt. It is an interesting Read which all should undertake, and the Author will finish given time. lgl