When will the United States grow out of its foreign debt?

In a 1989 article in this Review, John K. Hill argued that the mere aging of the baby boom generation would cause the United States to become a major capital exporter by the end of the century. To reach that conclusion, he assumed that rising U.S. capital outflows could be absorbed by the rest of the world without a decline in real interest rates. In this article, he considers the reasonableness of that assumption and reevaluates the accuracy of his earlier projections. ; Hill first examines the demographics of other major countries to see if they could support a rapid turnaround in the U.S. capital account. The results are decidedly negative. An analysis of capital flows based on demographic conditions in the United States, Japan, Germany, and the United Kingdom suggests that the United States could remain a net capital importer throughout this decade and into the early part of the next century. Despite these findings, Hill continues to support his earlier projections. He argues that new capital demands of former Communist and developing countries will help prevent a slide in interest rates and raise the international investment positions of all industrialized countries, including the United States.