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The U.S. is a substantial net debtor to foreigners – its debts exceed its claims by...

The U.S. is a substantial net debtor to foreigners – its debts exceed its claims by about a quarter of U.S. GNP! How can this fact be consistent with positive primary income balances (Primary Income receipts - primary income payments) ?  

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USA being a holder of substantial amount of debt from the foreigners, means funds are flowing from foreigners to the USA. It is causing increase in the income receipts. Here, debt is either paid in terms of instalments or in interests only. It makes income payments, but it becomes lower than the  income receipt. It makes income balance to be positive and consistent with the debt level of the USA. Further, the debt taken up has multiplier effect that further increases the income receipts than that of income payments. So, positive income balance takes place.

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