Last week the BEA report on U.S. Net International Investment Position showed that US liabilities to the rest of the world rose again.
The US net international position is now negative to the tune of $7.5 trillion.
The U.S. net international investment position at the end of the first quarter of 2016 was −$7,525.6 billion (preliminary) as the value of U.S. liabilities exceeded the value of U.S. assets. At the end of the fourth quarter of 2015, the net investment position was -$7,280.6 billion.
U.S. assets increased $742.1 billion to $24,082.9 billion at the end of the first quarter (chart 2).
- Financial derivatives with a gross positive fair value increased $586.4 billion, mostly in single-currency interest rate contracts.
- Assets excluding financial derivatives increased $155.7 billion to $21,101.1 billion, reflecting both an appreciation of major foreign currencies against the U.S. dollar that raised the value of U.S. assets in dollar terms and net U.S. acquisition of assets. These increases were partly offset by price decreases on direct investment and portfolio investment assets.
U.S. liabilities increased $987.1 billion to $31,608.5 billion at the end of the first quarter (chart 2).
- Financial derivatives with a gross negative fair value increased $604.5 billion, mostly in single-currency interest rate contracts.
- Liabilities excluding financial derivatives increased $382.7 billion, mostly reflecting an increase in U.S. bond prices that raised the value of portfolio investment liabilities.
What’s Going On?
This is a function of trade balance math. The US runs a trade deficit with the rest of the world, every month.
The net effect is in excess of $7.5 trillion.
If you seek a solution, please see Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold’s Honest Discipline Revisited.
Mike “Mish” Shedlock
Its 4th of july take a break
Sent from my Samsung tablet
It’s more than a bit ironic that this is posted on our Independence Day.
$7.525 trillion / 323.9 million US residents = $23,232 per person.
http://www.census.gov/popclock/
For a family of four, $23,232 * 4 = $92,928.
The average Joe with a wife and two kids has a hidden foreign debt of almost $100,000 resting invisibly upon his shoulders.
Enjoy the fireworks tonight, folks.
Was just very roughly calculating German WW1 reparations translated into 1921 dollars, adjusted for inflation to modern.
Result was @ 17 000 dollars per German in debt + <100% government debt to GDP aside ( similar to other post war countries of the time)
Some folks suggest to die broke. ARE WE THERE YET?
We’ve been there for a long time, but Obama says everything is peachy. (for him)
There is no indigenous savings, so people have to borrow from China to buy a home. Derivatives are not an asset in the long run. They go AIG every few years.
Since there is no indigenous savings, Americans have to borrow from China to buy a home, or build a factory. The derivatives are not an asset in the long run. They go AIG every few years.
Trade deficit? You mean we have to pay that back? I thought if China wants to sell us stuff at half price, we were all the better for it.
I guess we didn’t realize that when we bought the cheap stuff, the price we THOUGHT we were paying was just part of the actual cost and the rest went on our US credit card.
So we are good as long as we can just keep rolling the debt over like China and the rest of the world does.
I wonder WHICH broke ass nation will pop up first demanding payment on their loans as a means of covering their debts. I read that Italian banks are in a world of hurt, but doesn’t Italy hold an awful lot of loans also.
The doubling of natural gas prices in the past three months has added trillions to the US cash positive position. With all electric and self driving vehicle tech marching forward productivity continues to soar and the cost of transportation both in bulk and specialized continues to collapse. If you want in on the US economic engine you’ll have to pay. Cheap foreign oil is flooding in because refining costs are so low. The same goes for the near totality of manufactured goods. The USA is now both the low cost leader and the arbiter of final demand through consumption. Everyone else is trying to export their way into the USA to get some type of prosperity. My guess is they’ll start moving beyond buying Treasuries hand over fist to start driving down interest rates so that folks can afford their already cheap but amazing products.
Besides trade, don’t capital flows into the US (i.e. Into relatively “safe” US Banks from troubled Europe) impact this? It seems that funds from other countries parked in US banks are entered as liabilities and so would increase this category.