no.
Pure International Investment Jobs (NIIP) is a simple accounting concept. This is the total amount of foreign assets owned by Americans in other countries. Positive numbers mean values (but do not have Returns of US-owned foreign assets) are greater than value (but do not have (Return of foreign-owned US assets). A negative number means that the value of US-owned foreign assets is less than the value of foreign-owned US assets. More accurately:
What are your international investment positions?
The accumulated value of US-owned financial assets in other countries and the US debt to residents of other countries at the end of each quarter. The difference between assets and liabilities is in the US net international investment positions.
Like the trade deficit, the negative numbers here remind us of the image of debt and financial disasters. And like the trade deficit, the image is false. Of course, debt can become part of the equation, but that’s not the only one. In fact, foreign holdings of US debt have been declining. Americans are becoming few Thank you to the foreigners.
But another way NIIP can be misleading is to capture it, just like the trade deficit. International Tradenot all transactions. These transactions are just a small portion of the total US financial markets. As a result, negative May Look More and more countries are owned foreign countries. But reality is the exact opposite.
US Treasury Department Recently released a report Foreign holdings of US financial securities. Figure 2 is very clear. Decompose foreign and domestic holdings by type. One thing we see is that the share of foreign-owned US assets has generally declined flat/moderately since around 2009. But what about this when NIIP drops in the same period?
The answer is simple. Both foreigners and Americans want to invest in America. Foreigners invest in the US, so it appears in NIIP. However, Americans also want to invest more in the US than overseas, so they invest in those Please don’t It will be displayed in NIIP. NIIP is decreasing as the negative side of the equation becomes more negative and the positive side does not rise very quickly. However, America is a productive place, value Our assets are growing. Americans are wealthier than foreigners and are buying more assets. Therefore, NIIP will fall, but the share of US-owned assets remains the same. NIIP here is us Strengthnot our weakness.
For demonstration purposes, assume the following:
- US assets owned by US: $8 billion
- Foreign-owned US assets: $200 billion
- Total US assets: $10 billion
- US-owned foreign assets: $1 billion
These figures show that the US NIIP is -$10 billion ($100 billion to $20 million), with foreign holdings of US securities amounting to 20% of the total. Now, let’s assume that time has passed. And now we have these numbers:
- US assets owned by the US: $9.6 billion
- Foreign-owned US assets: $2.4 billion
- Total US assets: $120B
- US-owned foreign assets: $1 billion
After this period, the US NIIP will be -$14 billion ($1 billion to $2.4 billion), while foreign holdings remain 20% of US securities. Americans chose to invest their money in the United States rather than overseas. As a result, the NIIP falls, but that’s because Americans choose to keep their money domestically!
Paradoxically, if you want to reduce NIIP, you have to convince Americans in some way increase Investments that convince their overseas and/or foreigners Reduction Investing in America. Of course, one way to do that is to make America less competitive through “economic statecraft” (or the buzzwords “economic nationalism” and “mutual tariffs?” change very quickly). But just as one way to kill spiders is to burn the house, these tariffs do much more harm than good. They are ideal but useless.
The value is all good, but returns are also a problem. Here we see another paradox: the return on foreign investment in the US is Higher More than foreign returns on American investment. In other words, Americans make more money from foreign investment than foreigners do with US investments. why? Because once again about how great America is. American securities are relatively safe compared to other parts of the world. So foreigners want to keep their money safe and invest here. Americans clearly use that safety to invest heavily in America. But they also bring in higher returns as they chase higher interest rates overseas. look here.
Fear is a mind killer. Fear shuts down rational thinking and leads to eradication. And fear comes from lack of understanding. Both the trade deficit and the NIIP have brought much fear to those who don’t understand them. They see negative signs and assume negative outcomes. The fear of foreigners having everything is not essential to their minds. I have written about these fears before about the irrationality. They are now irrational, just as they were in the 1980s.
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PS: Another interesting note from its Treasury Department: US government debt is less owned by foreigners. Foreigners choose corporate debt and fairness. This makes us even more skeptical that simply balancing the federal budget would eliminate the trade deficit.
[1] A brief note: Trade deficits and NIIP are related, but not identical. The trade deficit is a flow. NIIP is in stock.
