I'm not sure how FRED determines Net International Investment Position but I can guarantee it is not accurate. If I (American citizen) transferred $100K to Euros 20 years ago to buy a house in Europe, and that house has appreciated in value, USA government only knows the original $100K, not the current value of the house. Or vice-versa if European buying house in USA. Corporate direct investment (factories, real estate, value of brands and other intangibles) also can't possibly be marked to market value, though current account gives some indication of value of assets which produce return (owner occupied houses do not produce return visible in current account, for example, but corporate direct investment might). This doesn't change anything in your argument, but USA net international investment position might be substantially different from FRED estimate.
It's going to be very interesting what happens when (not if) the Tesla and AI bubbles burst. I have long argued that USA will choose bigger budget deficits, Fed QE (money printing), inflation, interest rate suppression, falling exchange rate as its exit strategy. This strategy will help prevent a fall in bitcoin and gold prices. However, at some point, humanity will realize that bitcoin is useless and gold has limited real world uses and cost/oz to mine enough new gold to satisfy annual real world industrial and jewelry needs is vastly below speculative price. So neither of those "assets" (commodity is the correct word for gold) has long term value, IMO. But long term could mean several decades into the future in case of bitcoin and gold, with a blowoff price explosion in the shorter term as panic about USD sets in.
Another possibility is that Trump will initially welcome a deflationary collapse to drive down prices of real assets (stocks, real estate, private business, gold, bitcoin) so oligarchs can trade in their cash/bonds for these real assets before the inflation begins. Maybe have repeated deflation/inflation cycles to fully wipe out domestic commoners and also foreign asset owners.
Given the level of indebtedness in the economy, including the high debt leverage of corporations, any deflation could very rapidly turn into a self-feeding debt driven collapse of 1930s proportions.
One of the favourite ways for rich people to dodge capital gains taxes is to borrow money against their assets to fund their lifestyles so that they don't have to liquidate the assets and cause a tax event. In a debt deflation many rich people could become poor very fast. For example, Musk's Tesla stake is collateral against US$10 billions of loans.
So my money is on an attempt at controlled inflation to devalue the debt holdings in real terms, with interest rates held below the level of inflation. Highly supportive of hard asset prices, precious metals, bitcoin etc., and very toxic for the US$. Wages will of course lag the inflation as the vast majority of US citizens get a lot poorer. The QE will keep having to get bigger as foreigners refuse to buy bonds with a negative real interest rate in a currency falling in value.
In the event of a sudden overnight currency devaluation, the oligarchs in the know could front run the devaluation. Then buy US assets on the cheap with their appreciated foreign currency holdings. Pretty much what happens in Argentina on a regular basis.
In the 1970s the US was having problems paying for all of its bases abroad as the US$ went down in value. We could see this problem again if there is a steep fall in the US$ vs. the Euro, Won and Yen. Perhaps the trigger for the Empire of Bases to finally shrink.
The financial world is way too complex and rotten with misguided hubric abstracts to survive while still waging war against everyone one way . Few mention the human element as reasons for utter failure.
I'm not sure how FRED determines Net International Investment Position but I can guarantee it is not accurate. If I (American citizen) transferred $100K to Euros 20 years ago to buy a house in Europe, and that house has appreciated in value, USA government only knows the original $100K, not the current value of the house. Or vice-versa if European buying house in USA. Corporate direct investment (factories, real estate, value of brands and other intangibles) also can't possibly be marked to market value, though current account gives some indication of value of assets which produce return (owner occupied houses do not produce return visible in current account, for example, but corporate direct investment might). This doesn't change anything in your argument, but USA net international investment position might be substantially different from FRED estimate.
It's going to be very interesting what happens when (not if) the Tesla and AI bubbles burst. I have long argued that USA will choose bigger budget deficits, Fed QE (money printing), inflation, interest rate suppression, falling exchange rate as its exit strategy. This strategy will help prevent a fall in bitcoin and gold prices. However, at some point, humanity will realize that bitcoin is useless and gold has limited real world uses and cost/oz to mine enough new gold to satisfy annual real world industrial and jewelry needs is vastly below speculative price. So neither of those "assets" (commodity is the correct word for gold) has long term value, IMO. But long term could mean several decades into the future in case of bitcoin and gold, with a blowoff price explosion in the shorter term as panic about USD sets in.
Another possibility is that Trump will initially welcome a deflationary collapse to drive down prices of real assets (stocks, real estate, private business, gold, bitcoin) so oligarchs can trade in their cash/bonds for these real assets before the inflation begins. Maybe have repeated deflation/inflation cycles to fully wipe out domestic commoners and also foreign asset owners.
Given the level of indebtedness in the economy, including the high debt leverage of corporations, any deflation could very rapidly turn into a self-feeding debt driven collapse of 1930s proportions.
One of the favourite ways for rich people to dodge capital gains taxes is to borrow money against their assets to fund their lifestyles so that they don't have to liquidate the assets and cause a tax event. In a debt deflation many rich people could become poor very fast. For example, Musk's Tesla stake is collateral against US$10 billions of loans.
So my money is on an attempt at controlled inflation to devalue the debt holdings in real terms, with interest rates held below the level of inflation. Highly supportive of hard asset prices, precious metals, bitcoin etc., and very toxic for the US$. Wages will of course lag the inflation as the vast majority of US citizens get a lot poorer. The QE will keep having to get bigger as foreigners refuse to buy bonds with a negative real interest rate in a currency falling in value.
In the event of a sudden overnight currency devaluation, the oligarchs in the know could front run the devaluation. Then buy US assets on the cheap with their appreciated foreign currency holdings. Pretty much what happens in Argentina on a regular basis.
In the 1970s the US was having problems paying for all of its bases abroad as the US$ went down in value. We could see this problem again if there is a steep fall in the US$ vs. the Euro, Won and Yen. Perhaps the trigger for the Empire of Bases to finally shrink.
We are screwed unless somehow we managed to wrest back some modicum of control for the People.
The financial world is way too complex and rotten with misguided hubric abstracts to survive while still waging war against everyone one way . Few mention the human element as reasons for utter failure.