Timothy Geithner of the New York Fed is worried about the US investment balance:

Our trade deficit is now roughly the size of the current account deficit, and very large relative to our export base. And our net investment income balances are now likely to move into deficit.

It matters because of the trajectory of the U.S. imbalance. On reasonable assumptions about its likely near term path, this deficit will produce a very large net deterioration in our net external liabilities relative to national income, with progressively larger net transfers of income to the rest of the world.

If this were any other country than the United States, we’d be scratching our heads, wondering why the investment balance didn’t go negative some 15 years ago, when the US became a net debtor nation. It’s really quite a trick: generating an income of 0.25% of GDP when you have a net investment position equal to -20% of GDP. In Canada,  our net position is -14% of GDP, and we pay out just under 2% of our GDP on the investment balance.