David Stockman and Dark Matter

Paul Krugman has more on the rant by David Stockman:

Well, the $8 trillion number is right. But while it may be EIGHT TRILLION DOLLARS, that’s a cumulative deficit (which began in the 80s, by the way, not the 70s) of only half of this year’s GDP. And if you know anything about the subject, you know that America’s debtor position isn’t actually that deep, because of capital gains (which aren’t counted in the current account) ... But OK, market valuations are one thing, what about income flows? Aren’t we now paying a lot in interest to foreigners? Ahem. Here’s US net international investment income — income from US assets abroad minus income payments on foreign assets in the US — as a percentage of GDP

Yes – massive current account deficit started with that ill advised fiscal irresponsibility when David Stockman served as OMB director. But give Stockman a break as Robert Samuelson thought it started in 1964. As far as our net international investment income, it has been positive despite the fact that we have more foreign liabilities than foreign assets. Which got me thinking – what’s the latest on Dark Matter:

That is, the US is still borrowing from the rest of the world, but at a reduced pace. The value of the US' net foreign assets has been volatile as markets and currencies have gyrated over the past several years, but the official data says the US is even more in debt to the rest of the world now ... Repeating Hausmann and Sturzenegger's calculation today says that (as of the end of 2011) the US was a net creditor by $4540 billion. Relative to the official net international investment position of $4030 billion, that implies a stock of "dark matter" of $8570 billion! … The worry, circa 2005, was that buyers of US debt would run for the exit, leading to a spike in US interest rates and a collapse in the dollar. The crisis we actually got had the opposite effect, as everyone rushed into US debt, which has helped drive yields down. The US' net income is boosted by the fact that its paying very low returns on all those Treasuries being held abroad these days. In Hausmann and Sturzenegger's framework, the financial crisis has been a huge boon to US exports of (unmeasured) liquidity and insurance services.

But something tells me that David Stockman has no clue what this Dark Matter discussion was about.