Via Brad Setser comes a very nice summary of the competing views on the sustainability our massive trade deficit from Barry Eichengreen. While I’m not buying the “savvy investor” view of John Kitchen, his paper is worth the read. Kitchen notes the Dark Matter thesis and adds:
Cline (2005, p. 262), one of the few analysts to explicitly recognize and account for these “other” valuation changes, identifies them as “statistical ‘manna from heaven.’”
That would be William R. Cline’s The United States as a Debtor Nation (Institute for International Economics, Washington, DC, 2005).