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Honey, Who Shrunk the U.S. Income Surplus?

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Abstract

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. We show that the fading of the net investment income surplus stems from the upward shift in interest rates in the aftermath of the pandemic along with the continued net sales of U.S. assets to foreign investors.

Suggested Citation

  • Matthew Higgins & Thomas Klitgaard, 2026. "Honey, Who Shrunk the U.S. Income Surplus?," Liberty Street Economics 20260518, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:103264
    DOI: 10.59576/lse.20260518
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    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance

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