![]() ![]() equity and FDI holdings overseas relative to foreign holdings in the United States. ![]() stock prices, thus raising the market value of U.S. Furthermore, during this period stock prices outside the U.S. Hence when the dollar weakens (which is what happened between 20), the U.S.-dollar value of foreign assets rises correspondingly. affiliate based in Ireland) while almost all its liabilities are denominated in U.S. assets abroad is denominated in foreign currency (think of a Mexican government bond in pesos, or the value of a U.S. assets and liabilities driven by exchange rates and stock prices. The primary reason for this gap involves changes in the value of U.S. However, its net debtor position in that year was much smaller-only 17 percent of GDP. By 2010, it had borrowed the equivalent of about 45 percent of GDP from foreigners. ran very large current account deficits and did massive net borrowing from overseas. Instead, there are substantial divergences.ĭuring the “global imbalances” period of 1998 to 2008, the U.S. If external assets and liabilities did not fluctuate in value and everything was measured perfectly, the two lines would coincide. net borrowing from overseas during the period (broken line). NIIP as a share of GDP, together with the cumulative value of U.S. public debt, current account deficits add to the U.S. firms, foreign direct investment in the U.S., or sales by U.S. This borrowing can take the form of foreign purchases of U.S. runs a current account deficit, which is financed by net borrowing from abroad. residents exceeds domestic production of goods and services (the GDP), the U.S. Treasury and corporate bonds held by foreign central banks and other foreign investors, as well as foreign deposits in and foreign loans to U.S.-based banks. liabilities include the value of U.S.-based affiliates of foreign corporations, shares of U.S. residents (portfolio equity), bonds issued by nonresidents (for instance, Mexican government bonds bought by a U.S. multinational corporations (foreign direct investment, or FDI), shares of foreign companies held by U.S. assets abroad include the value of overseas affiliates of U.S. net debtor position increased so much? Second, is this increase in net foreign liabilities a cause for concern? (Spoiler: Not much.) How did we get here? current account deficits have been moderate during the past decade. This blog discusses two questions: First, how did we get here? After all, U.S. GDP, up from about 50 percent at the end of 2019 and well above the 16 percent of GDP recorded a decade ago. Senior Fellow - Economic Studies, The Hutchins Center on Fiscal and Monetary PolicyĪt the end of 2020, Americans owed $14 trillion more to the rest of the world than the rest of the world owed to America, according to the latest reading on the nation’s Net International Investment Position (NIIP) from the Bureau of Economic Analysis (BEA). ![]()
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