Here’s a chart I constructed, preparing to teach the open economy component of macro policy:
Figure 1: Net international position of the United States relative to GDP (blue scale, left), primary income balance relative to GDP (tan, right scale), both in percent. The NBER has defined the peak to trough dates of the recession in gray. Source: BEA via FRED, NBER and author’s calculations.
For many years, the United States has been a net debtor to the rest of the world (assets – liabilities < 0), and yet income from the rest of the world has exceeded payments to the rest of the world, consistently since 2007.
Either we mismeasure net assets (“Hausmann-Sturzenegger’s “dark matter”), or the returns on our assets abroad are consistently much higher than those on foreign assets here (“exorbitant privilege”), or some combination of two. See a very clear and concise discussion in these slides by Schmitt-Grohe, Uribe and Woodford (slide 47 et seq.). here is a Article from Econbrowser 2021.
Interestingly, the increasingly negative NIIP appears to have finally caught up with primary income, which has now fallen to zero.
