I do not buy this. We are the biggest net debtor in world history, however you count cap gains and all that. What is going on is the exercise of our global power. Our corporations are getting higher returns through outsourcing and transfer pricing. We take advantage of our reserve currency status. Finally, the reason we are able to borrow so low is the willingness of foreigners, especially Asian central banks, to lend to us. Some would say this is because we are so safe. I say it has more to do with wanting to keep the dollar up so they can sell to us and keep their employment up. They are lending to us so we can buy from them. An irony is that a Marxist analysis would say that clearly US capital is exploiting the entire rest of the world economy. Certainly our investors abroad are getting a higher return than foreign investors here. But then they are arguably exploiting us by hollowing out our industry. The basic H and S argument depends on capital markets being rational. This is also highly questionable, especially in the world of foreign exchange markets. They are as unpredictable, weird, and anomalous as any markets there are. I will say, however, that as long as that net income flow remains as it is, the US dollar will probably not crash. It is that flow that has gotten all those poor indebted emerging market economies in trouble.
While I remain an efficient markets type, the point about transfer pricing makes sense to me.