Amazing - so according to the free trade theory a guy selling his family assets and living off his credit cards is only accumulating "an investment surplus"! This is worth a ping.
True enough, until the quality of the debt instrument is marked down.
BTTT
A trade deficit today with no gold standard for international settlements is simply taking goods from one country in exchange for lots of little green pieces of paper with pretty pictures on them.
If we didn't have a surplus of wealth and income, we couldn't run a trade deficit under such a monetary regime barring mass inflation - but we don't see mass inflation anywhere in the price level. Ergo, we are wealthier overall.
The only thing for the foreigners to do with their American money is to horde it under their national mattress, to put it to work in our country, or to come over here as tourists and spend it. In the end, the financial loop must be closed and balanced out.
I don't see the comparison to selling assets and living off credit. The deficit is the result of the choices of individuals, not some sort of nationally directed policy. If the people didn't feel they were getting a better deal by purchasing foreign goods, they wouldn't.
Look at us versus the Japanese. The Japanese have a huge trade surplus, but in every way their people are much worse off and much poorer than ours, and their country is in dire financial and demographic shape. That's the result of hording money instead of spending it.