www.economicforces.xyz/p/never-reason-from-an-accounting-identity-c4f

The "must have invested in US debt or equities" conclusion does not follow from the official categories used in U.S. international accounts.

The Bureau of Economic Analysis says the current account covers not just goods, but also services, primary income, and secondary income. So if foreign firms were not using dollars to buy U.S. goods, they could still be using them for U.S. services or for other current-account transactions.

BEA also says the financial account is broader than just debt and equity. It includes direct investment, portfolio investment, other investment, reserves, and financial derivatives. Within "other investment," BEA specifically lists currency and deposits, loans, insurance technical reserves, and trade credit and advances. So even on the financial side, it is incorrect to say they must have invested only in U.S. debt or equities.

In short, official balance-of-payments definitions show multiple other possibilities besides purchasing U.S. goods or buying U.S. debt/equity, so the sentence overstates what "must" have happened.

This sentence is too restrictive about how non-U.S. residents can obtain dollars.

According to the Bureau of Economic Analysis, the current account includes not just trade in goods, but also services, primary income, and secondary income. So foreigners can receive dollars through exports of services or through income flows, not only by selling goods.

And BEA's financial account includes much more than goods trade as well: it records direct investment, portfolio investment, other investment, reserves, and financial derivatives. BEA explicitly lists currency and deposits and loans under "other investment." That means foreigners can also obtain dollar claims through financial transactions rather than by first selling goods.

So the claim that they would "need to sell goods to get dollars" is incorrect under the official accounting categories used for international transactions.

This sentence is too narrow about why imports are subtracted in the expenditure formula for GDP.

The Bureau of Economic Analysis explains that M is subtracted from the sum of C, I, G, and X because GDP should count only domestically produced goods and services. BEA further states that personal consumption (C), business investment (I), government expenditures (G), and exports (X) all include expenditures on both domestically produced and imported goods and services.

So imports are not subtracted only because they are already part of consumption (C). They are subtracted because imported goods and services can be embedded across the broader expenditure components, not just consumption.