US Net Investment Income

krugman.blogs.nytimes.com/

How’s that for a sexy blog post title? But this actually matters.

I’ve been arguing that the nature of US debt now is not, despite appearances, all that different from debt post-World War 2, when we pretty much entirely owed the money to ourselves. Now, of course, some of the money is owed to foreigners; but as I pointed out, America has large assets abroad, not too much less than its liabilities.

But wait, there’s more. American assets. often taking the form of foreign subsidiaries of US corporations, earn a higher rate of return than US liabilities — especially now, when there’s a lot of foreign money parked in Treasuries, but this was true even before the crisis. As a result, income from US-owned assets abroad — the blue line below — consistently exceeds payments on foreign-owned assets in the United States, the red line:

Again, if your image is that we’re deeply in hock to foreigners, that our extravagance has condemned us to a future of debt peonage, you’re wrong.