> The net US international investment position is actually $34tn in assets and $49tn in liabilities. That's in deficit, but like I said that's mainly due to the strength of the dollar

The Fed's view is relevant for analyzing dollar flows, but I'll happily go with the BEA data. Take a look here:
https://www.bea.gov/news/2021/us-international-investment-po...

And see the graph with the steeply falling blue line, which is our balance. What I am saying is that continuing this for another 40 years is not sustainable.

> That's in deficit, but like I said that's mainly due to the strength of the dollar (currency collapse my arse) depressing the relative value of US owned foreign assets. If the currency were to drop, they would even out.

OK, so you again confuse my argument, which is that the dollar is overvalued, with the claim that the dollar has already collapsed. I am not claiming it has collapsed, I'm claiming it is overvalued, and it will need to adjust sharply down.

I don't know why this is so hard to get straight. Then you counter with "if the currency were to drop, they would even out", which is the whole point I've been making!

When a currency is overvalued, it eventually drops to bring the trade into balance, and that is the currency crisis.

But the evening out is painful, because it means we can no longer afford the things that we rely on the foreign sector to provide, and have lost the ability to provide for ourselves via de-industrialization. That means, shortages, lower living standards, etc.

This goes back to understanding why the dollar is overvalued, which you claim is some random inexplicable thing, like why does J Lo have so many husbands. Who knows, it's a mystery! But it's not a mystery, it is just supply and demand. The dollar demand is foreign demand for US goods, combined with foreign demand for US assets. The dollar supply is domestic demand for foreign goods, and domestic demand for foreign assets. These meet, and that determines the dollar's value.

Therefore the high dollar is not a cause for extreme levels of foreign demand for dollar assets, it's the result of that elevated asset demand.

How do we know that this demand for dollar assets is irrational? Because the returns the foreign sector gets from the US is too low in comparison to their own investment opportunities domestically.

That means that they are purchasing dollar assets for non-investment reasons -- they are buying them in order to promote domestic production and support exports.

That means those dollar assets are being bought indiscriminately, and at scale, pushing down interest rates in the US and creating asset bubbles. Now that's a whole separate discussion -- the distortionary effects on interest rates -- but I brought up the scale of the asset purchases as evidence that these trade surpluses cannot continue indefinately. At some point, we will run out of assets that we are willing to sell to the foreign sector. And the foreign sector is not building new assets here, they are purchasing existing assets. You can see this from the either the BEA data or the FoF data. about 1/3 of the foreign asset purchases are US equities, 1/3 are US bonds, and 1/3 are direct investment, which is 99% acquisition of existing companies and 1% creation of new capital:

https://www.bea.gov/news/2021/new-foreign-direct-investment-....

So 1/3 of 1% of that foreign investment is actually "productive", as you say.

> Many countries have run extended periods of trade deficit for decades, including the US, and it's been no problem

No, the trade imbalances we've seen are unique in terms of scale. A good overview is here:

https://www.cfr.org/blog/why-global-trade-imbalances-could-g...

> So what actually matters is that you run a productive economy.

Yes, but you cannot run a productive economy with massive social unrest and permanent price distortions in the capital markets. OK, so what if the entire nation de-industrializes and needs to constantly borrow from the foreign sector to get the next consumption drop? That's sustainable, right? What if each home in the U.S. costs 3 million dollars and is owned by some REIT, what does it matter if an entire nation is forced to become renters -- it worked well for Ireland, so why can't it work for us, right?

Well, that's a recipe for social unrest in which the US decides it no longer respects property rights, and that's the point when the investment demand for dollars drops, and we swing into a current account surplus with the crisis I mentioned. Except then we will look around and see a deindustrialized commodity exporter with massive social unrest, and maybe then you'll stop saying "what's the matter? This is fine".

> Protectionism and subsidies is (and I can't believe I have to spell this out) not the way to run a productive economy.

At some point you have to go beyond buzzwords and actually string some thoughts together, based on real data, and a sober analysis of whether these global imbalances can continue. Waving red flags like ZOMG Protectionism!!! is not a substitute for that necessary work (I can't believe I actually have to spell this out).