Political Cortex: Brain Food for the Body Politic

For tribute paid to President Reagan at the 100-year mark of his birthday, a huge impact of the Reagan years can't be forgotten — though it collides with the sunny "rebirth" notion of the centennial remembrance.

In 2 terms as president, Ronald Reagan launched a government-deficit, tax-cut, soaring dollar policy which shifted the economy sharply to buying more and more the goods manufactured in other countries instead of made onshore, and also selling US assets and bonds (rather than goods) to foreigners, thus turning the US into a net debtor nation, quite abruptly.

The chart below appeared in an article in Fortune magazine in 2003 by Warren Buffett and Carol Loomis (graph viewable also here (pdf) or here.)

For the first time in modern times when the nation was not at war, the U.S. turned to financing the economy by giving foreigners ownership of more of our assets than we had a financial stake in assets of theirs abroad.