Income Flows from U.S. Foreign Assets and Liabilities

Matthew Higgins and Thomas Klitgaard

No 20121114, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Foreign investors placed roughly $1.0 trillion in U.S. assets in 2011, pushing the total value of their claims on the United States to $20.6 trillion. Over the same period, U.S. investors placed $0.5 trillion abroad, bringing total U.S. holdings of foreign assets to $16.4 trillion. One might expect that the large gap of -$4.2 trillion between U.S. assets and liabilities would come with a substantial servicing burden. Yet U.S. income receipts easily exceed payments abroad. As we explain in this post, a key reason is that foreign investments in the United States are weighted toward interest-bearing assets currently paying a low rate of return while U.S. investments abroad are weighted toward multinationals' foreign operations and other corporate claims earning a much higher rate of return.

Keywords: balance of payments; net income; asset position (search for similar items in EconPapers)
JEL-codes: F00 (search for similar items in EconPapers)
Date: 2012-11-14
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