I'm still not seeing the connection. He says none of the money ever goes to foreign countries. How does traded deficit enter into it?
But if you want to see the main point, consider the following figures. Here is the assets, debt, and net worth of the US household sector in 10 year snapshots going back to 1949. Entries are year, assets, debt, net worth. Source is the Fed's Z.1 data set, figures are in trillions of dollars.
2009, 64.5, 14.1, 50.4
1999, 48.9, 6.8, 42.1
1989, 23.3, 3.5, 19.1
1979, 9.6, 1.3, 8.2
1969, 3.7, 0.5, 3.3
1959, 2.0, 0.2, 1.8
1949, 1.0, 0.05, 0.95
The last 2 are particularly unflattering as to timing, with the stock market near its peak in 1999 and at its lows in this measurement (1Q2009). The asset and net worth lines have since moved up about $5 trillion as the stock market recovered. We get the details in mid September.
Every decade, US household assets owned goes up by huge amounts, and every decade a portion of that larger pool of owned assets is carried by debt - but the net worth line goes up by large amounts, always. Is some of that increase just prices, yes roughly half, the other half is a sustained increase in real wealth.
Even near record highs in 1999 and at bear market lows in stocks and real estate both today, over the last 10 years US households have added over $8 trillion to their net worth, less than half of their $15 trillion in net new assets being carried by new debt. It is perfectly normal for US households to add a trillion a year to their net worth, even with $700 billion a year in new debt.
Debt flat isn't negative net worth. The mistake is that simple.