> It's true foreign ownership of US stock has risen, but US ownership of foreign assets has also risen roughly in line.

Foreign holdings of US Assets, as of Q2 2021 are 43592.2 Billion[1]

US holdings of foreign assets are: 7694.6 Billion.[1]

We owe the world 43.6 Trillion, and they owe us 7.7 Trillion. That's a net debt of 35.9 trillion.

> Right now there is an imbalance, but that's due entirely to the strength of the US dollar inflating the value of US assets.

If by "right now", you mean we reached that 36 Trillion of net debt through steady growth since the 1970s, then I agree with you - assuming "right now" refers to a 50 year period of systemic and growing trade deficits.

> but that's due entirely to the strength of the US dollar inflating the value of US assets.

No, it's due to the rest of the world desiring to run trade surpluses against the U.S. in order to support an export led growth policy.

All of East Asia has industrialized on the back of running large export surpluses to the U.S. That's a strategic policy decision to drive the growth of manufacturing, and it is implemented by purchasing dollar denominated assets.

One side effect of these purchases is an overly strong dollar (as well as excessively low interest rates) but then that's what we had for most of the last 50 years.

It's not like the dollar is too strong as a result of some accident of the weather, and then this causes a trade deficit just out of nowhere. Golly, how did that happen?

> What's actually happening is the opposite of the currency crisis you fear.

I am not saying we are in a crisis right now. The reason why a crisis happens is because the currency becomes overvalued! That's where we are right now. The crisis is the future downward adjusment from the present overvalued state.

As the currency becomes overvalued over a long period of time, the nation begins to deindustrialize (due to importing too much) and suffers from asset bubbles (due to artificially low interest rates).

Then there is a crisis and the currency adjusts rapidly downward.

The bigger the overvaluation, the bigger the fall. You usually get an overcorrection as the current account swings into surplus.

> How can consumers buying Chinese goods be a sign of strength in China, but investors buying into US companies be a sign of weakness in the US?

Because they are the same damn thing.

For the US to run a trade deficit with the rest of the world, we have to be buying their goods and they have to be re-investing the proceeds back into buying US assets.

That's the only possible way you can have a trade deficit!

Look, the rest of the world sells us an apple for 1 dollar. Now, what does the world do with the dollar? We don't live in an age of specie flows, so they can't spend that money at home. It's fiat, and must be spent in the U.S.

Option A) It buys something from the US -- a peach. Trade is balanced.

Option B) It invests the money in the US -- it buys a bond, or a share of stock. Trade is not balanced.

But those are the only two options.

So saying the rest of the world is a net purchaser of US financial assets is exactly the same thing as the rest of the world is a net exporter to the US of their goods.

> The US is attracting so much foreign investment precisely because it's economy is in a very strong position.

No, the US is not "attracting" foreign investment, the US is selling off its assets to the rest of the world in exchange for higher present consumption.

> Meanwhile US companies and investors are investing heavily abroad.

No they are not. They own a total of 7.7 Trillion of foreign assets, whereas the rest of the world owns 43.6 Trillion of US assets.

> That's not weakness, it's integration.

OK. Can I integrate with your balance sheet along the same terms? I'll end up with $44,000 of your assets, and you'll end up with $6,700 of my assets. It's equal! We will dance in mutual friendship.

> The USA today is not even remotely comparable to Russia in the 90s.

You'd be surprised to learn that as far as international trade goes, our biggest exports are commodities. No, we are not Russia, of course, but then concerns about the U.S. currency are much bigger than in Russia -- I was using Russia as an example of the pain of currency adjustment. I was not saying that we were Russia.

[1] https://www.federalreserve.gov/apps/fof/guide/l133.pdf