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great charts - imply the safe assets shortage will get worse as safe assets grow smaller relative to the global economy - note Fed data from last year showed the ratio of safe assets to US GDP has more than doubled since the 1950s
AI Summary. Foreign investors hold $69tn in U.S. assets against $41tn held abroad, creating a $15tn net liability gap that subtracts $150bn from U.S. investment income for every 1% rise in interest rates — 50% more sensitive than five years ago.
Matthew Higgins and Thomas Klitgaard Liberty Street EconomicsCore argument: The $28tn gap between foreign holdings of U.S. assets ($69tn) and U.S. foreign holdings ($41tn) drives mounting income payments abroad.
Foreign holdings of U.S. financial assets are immense, with official estimates putting their current market value at $69 trillion. U.S. holdings of foreign assets are also impressive but much smaller, at $41 trillion. The shortfall in U.S. foreign assets relative to foreign liabilities has been mounting for decades. Yet U.S. investment income receipts—in profits, dividends, and interest—comfortably exceeded income payments until recently. Payments on U.S. assets owned by foreign investors represent a servicing burden for the U.S. economy. Profits, dividends, and interest payments that would otherwise accrue to domestic investors instead flow abroad. Given the need to sell U.S. assets to finance ongoing trade deficits, this servicing burden seems likely to mount. The related buildup in the U.S. net liability position in interest-bearing assets will also make the income balance more sensitive to swings in interest rates. This increased sensitivity is already in evidence. At present, with the asset-liability gap at -$15 trillion, a 1 percentage point increase in U.S. and foreign interest rates would subtract $150 billion from the U.S. net income balance. (A 1pp fall in rates would result in a similar improvement.) Only five years ago, a 1 percentage point rise in rates would have subtracted $100 billion.AI Summary. The United States current account deficit is not required to supply the world with dollars, because foreign entities can acquire dollar assets by selling financial assets to Americans rather than goods, leaving the current account balance unchanged.
Maurice Obstfeld Peterson Institute for International EconomicsCore argument: I cannot generate the requested takeaways because the source material contains no quantitative data, numerical findings, or comparative metrics. The.
Critics of the dollar's global role have argued that foreign official dollar purchases (labeled US incurrence of official liabilities in the figure) feed one-for-one into US current account deficits. To illustrate the true loose relationship between these two variables, the figure shows both of them over the 2003–25 period, as percentages of GDP. US net incurrence of liabilities to official holders, reported with a minus sign as in standard balance-of-payments methodology, is usually far too small to mirror the US current account deficit. And since roughly 2014, net official financial inflows have fluctuated around zero as the current account deficit has widened. To be sure, the strong international demand for dollars may make the dollar stronger against foreign currencies than it would be otherwise, [but] while they imply a smaller current account balance, they do not necessarily imply a negative balance and certainly not a rising negative balance, especially when foreign dollar reserve holdings have been shrinking relative to global economic activity (as figure 1 also implies). The euro is the world's second reserve currency, yet the euro area has a current account surplus. Britain had surpluses up until World War I despite issuing the world's premier global currency and hosting its leading financial center. Reducing the US fiscal deficit materially and sustainably is the most important US policy prerequisite for global current account rebalancing.AI Summary. Four economies—the United States, China, Germany, and Japan—account for roughly two-thirds of global imbalances, with current account surpluses and deficits now lasting twice as long as they did in the 1980s. Persistent imbalances have accumulated into large foreign asset and liability positions, with the United States holding net foreign liabilities
IMF Staff International Monetary FundCore argument: Surplus durations have doubled since the 1980s, accumulating massive foreign asset positions for China, Germany, and Japan.
Four economies—the US, China, Germany, and Japan—account for roughly two-thirds of global imbalances. The US deficit—equivalent to 4% of GDP as of 2024—has been financed by capital inflows and portfolio investors seeking dollar assets. Germany and Japan’s surpluses have been driven by high saving rates, joined by substantial surpluses in China beginning in the 2000s. Oil-exporting countries’ surpluses fluctuate with commodity prices, creating episodic contributions to global imbalances. In earlier decades, surpluses and deficits were more cyclical: countries moved in and out of surplus depending on business cycles, commodity shocks, and exchange rate movements. While there is no standard definition of persistence, the average duration of a deficit or surplus spell roughly doubled since the 1980s. Persistent surpluses over the past two decades have accumulated into very large net foreign asset positions for economies such as China, Germany, and Japan, with each holding net foreign assets equivalent to 3–3.5% of global GDP in 2024. Similarly, persistent deficits have built up into large net liability positions, most notably in the US where the NIIP stands at about -25% of global GDP in 2024, underscoring the central role of the US position in global balances (Figure 6).