Stephen "Current accounts almost always don't matter" Jen is intrigued by Ricardo Hausmann and Fredrico Struzenegger's discovery of dark matter.   Lots of others are too.   Michael Mandel for one. See Claus Vistesen for a wrap-up of the initial flurry.

Jen's and Mandel's interest is no surprise.  Dark matter supports Jen's over-arching dollar bullishness in the face of large deficits, even if it doesn't generate the $1 trillion or so in cold hard cash the US needs to finance its (expected) 2006 current account deficit.   Though in fairness, Jen currently expects the dollar to weaken against Asia -- just for cyclical reasons, not structural ones like the US current account deficit. And the discovery of dark matter supports Mandel's belief that the current account deficit is dated concept -- rising external liabilities are fine so long domestic assets are rising.   Dark matter suggests that the United States' (net) external liabilities, correctly measured, aren't really rising. 

I digress.   This post is about the origins of dark matter, not its adoption by those who think current account don't matter - or at least do not matter quite as much as I do.  I have a bit of skin in this game: Hausmann and Sturzenegger frame their argument (which has now been updated) in part as a response to the arguments Dr. Roubini and I have made in the past.  

So my apologies for a lengthy, data-rich, link-heavy post that tries to synthesize a lot of material. The Lex column of the FT covers some of the same ground in far fewer words.  

Both Higgins, Klitgaard and Tille of the New York Federal Reserve and the CBO also have examined why the US earns more on its overseas assets than its pays on its external assets.  They, like me, just didn't have the genius required to spin the fact that foreign investment in the US earns next to nothing (judging from the balance of payments data) as a good thing.  Or the temerity to argue that the US can finance its current account deficit by borrowing against the imputed assets ("dark matter") created by low foreign returns on investments in the US!