For decades, the U.S. enjoyed a peculiar privilege: It owed the world a fortune but somehow still collected more than it had to pay out. The country was effectively able to consistently run up a tab and still walk out ahead.
That trick is now running out, according to economists at the Federal Reserve Bank of New York.
Overseas investors—from national governments and sovereign wealth funds to pensions and private institutions—currently hold nearly $69 trillion in U.S. financial assets, Fed economists wrote in a blog post published Monday. This includes Treasury bonds, S&P 500 stocks, and direct stakes in American companies. U.S. investors, meanwhile, hold $41 trillion in foreign assets. The gap between those two figures comes out to $28 trillion, representing the country’s net international investment position, now deeply in the red.
For a long time, the U.S.’s status as a net debtor didn’t matter much, largely because American investors earned enough on their overseas investments to compensate for the amount the country had to pay internationally to asset-holders. The Fed researchers called this the U.S. “rate of return advantage.” In 2019, for example, the U.S. collected $260 billion more in investment income than it sent abroad.
