The Economist Friday said:

In a rare instance of economic consensus, almost everyone now agrees that the current-account balance, which was over $800 billion in the red at the end of last year, is unsustainable.

They should know that there is no such thing as a consensus of economists. I am not a macro guy, but if the US economy continues to generate capital (intellectual property, companies with lots of educated workers, houses, etc.) at a tremendous rate, then the capital surplus will result in other countries giving us non-capital goods in exchange for our capital goods. A capital surplus and a trade deficit are the same thing.

For all our regulation, taxes and flaws in our judicial system, most of the rest of the globe has less rule of law, higher taxes and more flaws in their judicial systems. The US is a great place to make safer investments like real estate and blue chip corporate bonds. Do you think the Norweigians and Saudis invest their huge current account surplus in their own respectively not so dynamic and not so productive economies?

As I said before, our human and physical captial stock is growing by a lot. Even though the average house price went down for one quarter, it has been growing at 6.5% in money terms for 43 years or 2.1% accounting for inflation. That leads to $440 billion in appreciation of the existing capital stock. The number of homes has also been growing. I estimate this by looking at the home ownership rate, the number of people per household and the growing population. Together they indicate we add another 1.8% a year to the housing stock in numbers. (This could be offset by less rental housing capital, but I doubt it.) So that is about $800 billion we are adding to the housing capital stock and residential housing construction is just 3-4% of GDP.

We can grow the US owned capital stock forever and have plenty left over to sell to foreigners.