Still thinking about debt; and it seems to me that there’s an important aspect of the story that isn’t getting any play, namely, the extent to which US debt has in effect been issued to buy assets overseas.

Here’s what the figures for US assets abroad and foreign assets in the US look like:

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What we’ve seen is a lot of financial globalization, with both assets and liabilities rising fast. The liabilities have gone up more than the assets, so we’ve gone from being a net creditor to a net debtor, but the fact that both sides have gone up matters, because the way America invests isn’t the same as the way it borrows.

Basically, we issue debt and buy equity: US liabilities consist largely though not entirely of bonds — yes, there are a lot of foreign-owned companies, but they’re a much smaller factor — while US assets abroad consist mainly either of direct investments (companies we own) or stocks. Because US assets are higher-yielding although riskier than US liabilities, we still earn more from our investments than we pay on our liabilities. In the aggregate, America is a bit like a hedge fund that borrows to make risky investments; that’s arguably not a good thing, but it’s not a story of living beyond our means.

Now, the point for the debt discussion is that the bonds we sell to foreigners count as part of the US debt number, but the assets we buy abroad don’t count against it. So financial globalization would show up as a rise in “American debt” even if we were buying just as many assets as we were selling, and therefore not living beyond our means at all.

Parsing the data to put a number on this effect is tricky, because I don’t know how the “claims reported by banks, not reported elsewhere” — about $3 trillion in both assets and liabilities — pops up. But a rough guess is that this financial globalization effect — an effect that is all about leverage, not at all about overspending — has added between 30 and 50 percent of GDP to the reported US debt ratio.