But as for banks this investment strategy was risky

As individuals, countries have assets (financial assets from the rest of the world they have) and debts (which holds the rest of the world). When assets are higher than the debt, the country is credit of the rest of the world. Analyze the history of the external position of the United States is fascinating.

During the second world war, the US Treasury made a precise study of the assets of the United States abroad and possessions of us financial assets by non-residents. These data had a strategic value. Need to locate the riches of the axis and protect to the extent of possible American investment. At the time, assets held by foreigners were largely lower and U.S. investment abroad were of the same order of magnitude, around 10 of the GDP of the United States. The country was to the rest of the world but its external position (assets less debts) did not exceed 4 of GDP. The great period of financial globalisation had not begun.

During the period of Bretton Woods, the regulations on capital flows are maintained and the assets and external debts of the United States would increase only slowly. Their amounts do not exceed 15 of U.S. GDP in 1973. Treasury focuses its attention on the management of its stock of gold and tries to counter attacks French, taken by Giscard d'Estaing and de Gaulle, against the hegemony of the dollar. Inflationary 1960s will finally have reason for Bretton Woods. With the liberalization of flows of capital in the 1980s and 1990s, begins a significantly faster growth of cross-border asset purchases. End of 2007, at the beginning of the crisis, foreign assets held by the United States amounted to 122 of their GDP in foreign assets and their debt to the rest of the world stood at 135. Their net external debt was 13 of GDP. This growing net debt results directly from the US trade balance deficits accumulated since the 1980s.

But more interesting is the exponential increase in the gross positions. The United States from before the crisis are similar to an investment bank that is heavily financed by issuing debt and invests in a colossal way in active foreign risks (stocks, direct investment). In so doing, the United States get a return on their assets and re-finance taken down on the debt market, taking advantage of the global infatuation with US Treasury bills. They thus cash the difference in yields.

But as for banks, this investment strategy was risky. Asset and debt prices become volatile, the value of the external portfolio of the United States becomes even more volatile because of the leverage effect. This is exactly what is happening in the current crisis. End of 2008, the value of foreign assets held by the United States fell to 85 of the GDP, external to 122 of GDP debt, so that the net external position of the United States collapsed up to-37 of GDP!

Movements of such magnitude are unpublished for the external accounts of the United States. They are due to very strong fluctuations of values: assets and debt have had rates of return very negative (approximately 30 and 10 percent between late 2007 and late 2008). But repatriations of capital have also played an important role. Private agents have sold assets held abroad in proportion: the financial world retracts behind national borders in times of crisis. Ironically, the only asset that was found through the eyes of international investors during this period consists of bonds issued by the U.S. Government. They now constitute 45 of the total external debt of the United States and are particularly concentrated in the hands of the Central Bank of China. Despite the aggressive statements by Chinese authorities against the hegemony of the dollar, China continues to be a large buyer of Treasury bills. Thus, the crisis made de facto the US economy even more dependent on China's investment decisions. During the second world war, as in the years 1960 where de Gaulle sought to undermine the position of the dollar, the strategic dimension of international finance resurfaced.