The Implications of Dark Matter for Assessing the US External Imbalance

Abstract

This paper clarifies how dark matter changes our assessment of the US external imbalance. Dark matter assets are defined as the capitalized value of the return privilege obtained by US assets. Because this return privilege has been steady over recent decades, it is likely to persist in the future or even to increase, as it becomes leveraged by an increasingly globalized world. Once this is included in future projections of US current accounts, the US external position looks much more balanced than depicted in official statistics.

Keywords

global imbalances, United States current account deficit, valuation problems, Foreign Direct Investment (FDI)

JEL Classifications

F32, F34, F36, F41