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How Long Will US Foreign Net Income Dark Matter Continue?

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How Long Will US Foreign Net Income Dark Matter Continue? The United States became a net foreign debtor in 1985. With current account deficits every year since then, net foreign indebtedness has steadily increased since and reached a reported total of -.56 trillion as of Sept. 30 this year, a substantial total. However, while many have long predicted that this mounting net foreign indebtedness would eventually lead to the US also having a net negative capital income flow, it has not happened. In 1985 when the US initially went into net indebtedness, the US had a net surplus on capital income of about billion. Rather than shrinking, that surplus apparently increased somewhat in the subsequent 34 years. As of the second quarter of this year, it

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How Long Will US Foreign Net Income Dark Matter Continue?

The United States became a net foreign debtor in 1985. With current account deficits every year since then, net foreign indebtedness has steadily increased since and reached a reported total of -$10.56 trillion as of Sept. 30 this year, a substantial total.

However, while many have long predicted that this mounting net foreign indebtedness would eventually lead to the US also having a net negative capital income flow, it has not happened. In 1985 when the US initially went into net indebtedness, the US had a net surplus on capital income of about $30 billion. Rather than shrinking, that surplus apparently increased somewhat in the subsequent 34 years. As of the second quarter of this year, it appears that the annual surplus of capital income was running in the neighborhood of $100 billion.

While there are serious sources of uncertainty and noise in much of this data, it certainly seems that US-owned assets abroad are earning far higher rates of return than what foreigners are earning from their assets in the US. This has for quite a long time been labeled the “dark matter” phenomenon.

The question arises: how long can this odd situation continue?

Barkley Rosser

Barkley Rosser
I remember how loud it was. I was a young Economics undergraduate, and most professors didn’t really slam points home the way Dr. Rosser did. He would bang on the table and throw things around the classroom. Not for the faint of heart, but he definitely kept my attention and made me smile. It is hard to not smile around J. Barkley Rosser, especially when he gets going on economic theory. The passion comes through and encourages you to come along with it in a truly contagious way. After meeting him, it is as if you can just tell that anybody who knows that much and has that much to say deserves your attention.

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