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In Chapter 10, Carbaugh Asks, “Can the United States Continue to Run Current Account Deficits Indefinitely?” Since in the long term, the obvious answer is no, perhaps the question should be rephrased to ask the following:
·
Does the United States’ unique position in the world economy allow the country to safely run persistent external deficits?
· Can persistent U.S. deficits in the current and payments accounts be adjusted without bringing about economic recession or crisis?
In a 4-6 page (12-point font, double-spaced) essay, summarize and critically evaluate the main positions provided on this in Carbaugh’s Chapter 10 and the Deutsche Bank Research piece also assigned as reading for this module. Deutsche Bank Research
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Stefan Schneider
+49 69 910-31790
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Managing Director
Norbert Walter
Current Issues
The U.S. balance of payments: wide-
spread misconceptions and exaggerated
worries
• The U.S. balance of payments is by far the most confusing and least
understood area of the U.S. economy. The confusion is centered around the
large and rapidly growing deficits. Indeed, the deficit on the current account of
the balance of payments rose to new records, both in absolute and relative
terms.
• These developments created worries and fears regarding the sustainability of
the external deficits. However, closer examination of the issue shows that the
worries and fears are exaggerated and, most importantly, there are no short-
and medium-term solutions because of a number of structural reasons.
Mieczyslaw Karczmar, +1 212 586-3397 (mkarczmar@aol.com)
Economic Adviser to DB Research
Guest authors express their own opinions, which may not necessarily be those of Deutsche Bank
Research.
October 1, 2004 Current Issues
Economics 3
The U.S. balance of payments is by far the most confusing and least
understood area of the U.S. economy. The confusion is centered
around the large and rapidly growing deficits. Indeed, the deficit on
the current account of the balance of payments rose from USD 474
billion in 2002 to USD 531 billion in 2003 and is estimated to reach
over USD 600 billion in 2004 (see table 1). In relative terms, the
deficits amount to 4.5%, 4.9% and 5.3% of GDP, respectively, in
those years. Both in absolute and relative terms, these are all-time
records.
The sustainability of external deficits
Persistent and rising external deficits have attracted increasing at-
tention of politicians, economists and the media. Needless to say,
the deficits are generally viewed as highly negative for the U.S.
economy and U.S. financial conditions. The main points of concern
are:
• Rising foreign indebtedness that might create financial difficulties
over time.
• A potential massive dollar depreciation needed to rectify the
situation.
• In an extreme case, a financial crisis as foreigners refuse to fi-
nance U.S. deficits and switch their capital to other places.
The media, regardless of their political outlook, have been
commenting on the U.S. external deficits for quite some time,
spreading fear and predicting all sorts of calamities, which
apparently sells newspapers well. About five years ago, in the fall of
1999, The New York Times ran an article with a pointed headline:
“The United States sets a record for living beyond its means;” and a
Barron’s article talked about a current account crisis and a ticking
time bomb.
Had these scary predictions materialized, the U.S would have been
bankrupt by now. But never mind, the fascination with the rising
deficits continues. A Financial Times article a few weeks ago was
headlined: “America is now on the comfortable path to ruin.”
The persistence of external deficits and their presumable negative
effects have focused the economic debate on the key question. Are
the deficits sustainable? A generally uniform answer is that not, that
they are not sustainable. The Federal Reserve chairman Alan
Greenspan has repeatedly emphasized that he does not believe the
deficits can go on indefinitely. But he confessed that he does not
know when will they stop. And he admitted that so far the financial
markets have coped very well with the global payments imbalances.
The late Herbert Stein, a great economist with a great sense of hu-
mor, had famously said that if something cannot go on forever, it will
stop. The logic of this reasoning is unassailable. However, 2004 will
be the 29th consecutive year of trade deficits and (disregarding the
statistical aberration in 1991 when foreign contributions to finance
the Gulf war produced a small surplus) the 23rd consecutive year of
current-account deficits. But during this period, the U.S. enjoyed a
generally prosperous economy, especially during the decade of the
1990s when the economy went through an unprecedented boom.
So maybe Stein’s saying should be reversed – if a trend goes on for
a long time, and it not only does not have any harmful effects but, on
the contrary, coincides with a period of prosperity, it may well be
sustainable.
One-liners aside, there is an apparent conflict between theory and
empirical evidence. To address the contradiction between theoretical
and empirical considerations, it is necessary to examine the
Scary media predictions have so far
not materialised
-6.
0
-5.
5
-5.0
-4.5
-4.0
-3.5
-3.0
2000 2001 2002 2003 200
4
-700
-600
-500
-400
-300
-200
–
100
0
Current account
USD bn
(right)
% GDP (left)
-600
-500
-400
-300
-200
-100
0
100
70 75 80 85 90 95 00
Current account &
trade balance
Current account
USD bn
Trade balance
Current Issues October 1, 2004
4 Economics
following key aspects of the U.S. balance of payments: a) the nature
and underlying causes of the deficits, b) the financing of the deficits,
c) main characteristics of U.S. foreign debt, and d) the role of the
dollar in dealing with the external deficits.
Main characteristics of U.S. external deficits
When analyzing the external deficits, it is essential to distinguish
between cyclical and structural deficits. The cyclical deficits are
non-controversial and easy to understand. They result from the
disparity in economic growth between the U.S. and its main trading
partners, with the U.S. showing stronger growth. This generates
increased demand for imports while U.S. exports are hampered by
slower growth abroad.
Over the past 20 years, the U.S. has shown generally strong eco-
nomic performance (except for two brief and shallow recessions in
1991 and 2001), superior to most other industrial countries. It is,
therefore, not surprising that this coincided with rising trade and
current-account deficits. Indeed, while in 1983 the current-account
deficit amounted to 1.1% of GDP, it has risen to about 5% in the last
two years.
How long this strongly rising deficit trend would last? It is difficult to
predict with any certainty. Yet, although the trend has been cyclically
driven, it has certain permanent characteristics rooted in demo-
graphic and productivity aspects.
First, the U.S. is the only major industrial country with growing popu-
lation. The latest census in 2000 has shown that during the decade
of the 1990s U.S. population grew by 13.2%, in contrast with stag-
nating or shrinking populations elsewhere in the industrial world.
Moreover, although the U.S. population is aging, it is aging less than
in other main industrial countries – the census revealed, e.g., that
72.7% of U.S. population was below the age of 50, while the number
of people in the 35-54 age range, the most productive and highest
spending segment, increased by 32% in the previous decade.
Second, the technological revolution of the 1990s was most
pronounced in the U.S. as it was in America where the
Schumpeterian “creative destruction” took mostly place. This led to
strong productivity gains, superior to those in most other nations.
The combination of population and productivity growth resulted in a
rising growth potential of the economy. Even allowing for the most
recent slowdown in productivity growth, potential annual growth of
the U.S. economy is still estimated at about 3.5%, i.e. about 1%
higher than in Europe.
To be sure, there has been an acceleration of the economic expan-
sion in Japan (even allowing for the most recent slowdown) and
continuing strong growth in China and the Asian newly industrialized
countries (NIC). This should boost U.S. exports and possibly arrest
the inexorable widening of U.S. deficits. But eliminating them, let
alone turning them around into surpluses, is out of the question in
the foreseeable future. The reasons lie in the structural deficits.
The structural deficits draw much less attention than the cyclical
ones, even though they are at least equally important. Even if the
disparity in economic growth rates between the U.S. and the rest of
the world were eliminated, the U.S. would still have trade and
current-account deficits for the following main reasons.
First, U.S. income elasticity of imports is higher than foreign income
elasticity for U.S. exports. This phenomenon is rooted in the general
openness of the U.S. market, which makes imported goods readily
available and it makes them available at increasingly competitive
U.S. has exceptionally high income
elasticity of imports
-600
-500
-400
-300
-200
-100
0
100
70 75 80 85 90 95 00
-4
–
2
0
2
4
6
8
Current account & real GDP
Current account
(right)
USD bn
Real GDP
(left)
% yoy
-4
-2
0
2
4
6
8
10
90 92 94 96 98 00 02 04
Nonfarm productivity
% yoy
October 1, 2004 Current Issues
Economics 5
prices. Moreover, the development of industrial cooperation and
outsourcing has increased sharply income elasticity of imports, as
some products or groups of products are no longer produced in the
U.S. While traditionally the ratio of import growth to GDP growth was
about 1.7, it is now closer to 2.5 –3.0.
Second, the proliferation of outsourcing, beginning with the North
American Free Trade Agreement (NAFTA) 10 years ago, and now
extended to India, China and other Asian countries, has almost by
definition widened the U.S. trade deficit as US products shipped
abroad return to the US with value added; hence, the value of im-
ports exceeds that of exports.
Third, the U.S. dollar’s function as the main reserve currency makes
the current-account deficit inevitable because of (a) inflow to the
U.S. of monetary reserves of foreign central banks due to the normal
accumulation of these reserves, especially in countries with current-
account surpluses, and (b) occasional interventions in foreign ex-
change markets by countries trying to resist the appreciation of their
currencies vis-à-vis the U.S. dollar.
Of course, this source of financing the U.S. current-account deficits
is not guaranteed forever. It is hoped that eventually the euro will
also become a main reserve currency, which would in fact fulfill de
Gaulle’s idea of breaking the dollar’s hegemony that was at the
foundation of the concept of a single European currency. But this is
not likely to happen in the near future. The dollar is still the dominant
reserve currency as about 65% of global monetary reserves are held
in dollars.
The financing of U.S. external deficits
It is an axiom of the foreign trade theory that a country can run a
balance of payments deficit only to the extent it can finance it, either
through borrowing or through depleting its foreign exchange
reserves.
In this respect, the U.S. is in an exceptionally advantageous situa-
tion because it does not need to borrow in a conventional sense.
The financing comes voluntarily because of the attractiveness of the
U.S. as an investment destination providing generally higher rates of
return than obtainable elsewhere; because of the seize, scope,
openness and liquidity of the U.S. capital markets; and because of
the dollar’s role as the world’s prime investment, transaction and
reserve currency. Interest rates are determined by the conditions in
the U.S. money and capital market rather than dictated by the lend-
ers. And, unlike most other countries, the U.S. has the ability to fi-
nance its external deficits in its own currency.
There is no doubt that this relative easiness in financing is an impor-
tant factor in sustaining the US trade and current-account deficits.
Some economists go even further. They contend that it is the financ-
ing side of the equation, or net capital inflow, that determines the
current-account deficits. For example, Milton Friedman – in an inter-
view earlier this year – when asked about the reason for the U.S.
current-account deficit, responded that it is because foreigners want
to invest in the U.S. This view was postulated by the Austrian
economist Böhm-Bawerk a good 100 years ago, stating that it is the
capital account of the balance of payments which leads the current
account.
This view is also represented by William Poole, president of the
Federal Reserve Bank of St. Louis. In a paper published in the
January/February 2004 issue of the Federal Reserve Bank of St.
Louis Review, Poole – drawing on research of Catherine Mann from
the Institute for International Economics in Washington – examines
2
4
6
8
10
12
14
16
80 82 84 86 88 90 92 94 96 98 00 02 04
10Y Govt. bond yields
%
USA
Germany
Current Issues October 1, 2004
6 Economics
three different views of the U.S. international imbalance: (a) the
trade view, in which trade flows are the primary factors and the
offsetting capital inflows are secondary, (b) the GDP view, in which
the current-account deficit is perceived as a shortfall between
domestic investments and domestic savings, and (c) the capital
flows view, in which the trade and current-account deficits are a
residual, the result of the capital-account surplus.
This surplus, in turn, is driven by foreign demand for U.S. assets
rather than by any structural imbalance in the U.S. economy.
Needless to say, the capital flow view is the most amenable to the
sustainability of the U.S. external deficits. There is a legitimate
concern voiced by some economists that – due to persistent foreign
demand for U.S. assets – the U.S. has absorbed some 80% of
international savings in recent years. This may cause a U.S. dollar
overweight in global portfolios. However, there is no solution in sight
for this apparent asymmetry in portfolio allocations.
The financing of U.S. external deficits is an area of the greatest mis-
conceptions. A popular view held by some economists and the me-
dia is that foreign investors might refuse to finance the U.S. deficits
and switch their capital to other places or invest in their own coun-
tries, which could have dire consequences for the U.S.
This may indeed happen. But one should keep in mind that
foreigners invest in the U.S. because they view this as
advantageous for them, not to do America a favor. Granted, they
may decide to increase their domestic investments. But as long as
the U.S. has a large current-account deficit and Japan, China and
other countries have large surpluses, continuing capital inflow to the
U.S. is assured.
It is also true that foreign countries may shift some of their monetary
reserves to other places. But as long as the U.S. dollar remains the
pre-eminent reserve currency, this is unlikely because of the limited
size and scope of other monetary areas. The situation illustrates the
“exorbitant privilege” – in de Gaulle’s words some 45 years ago –
the U.S. derives from the dollar’s global role. This enables the U.S.
to run “deficits without tears” as described by Jacques Rueff, de
Gaulle’s adviser.
In short, if someone argues that at some point foreigners might re-
fuse to continue financing U.S. external deficits, a question must be
answered – where would they go with their money. The alternatives
to investing in the U.S. are very limited, indeed.
The U.S. international indebtedness
A very important issue in assessing the sustainability of the U.S.
external deficits is the magnitude and structure of U.S. foreign
indebtedness, as reflected in annual Commerce Department reports
on U.S. international investment position (see table 2).1
As can be seen, net indebtedness reached at the end of 2003 USD
2.4 trillion or USD 2.6 trillion (depending on the valuation method of
U.S. and foreign direct investments), i.e. close to 25% of GDP, up
from a rough equilibrium in 1989. This has caused widespread lam-
entations that the U.S., the richest country in the world, has become
within 15 years the biggest debtor in the world.
1 U.S. international investment position does not exactly represent U.S. foreign debt,
since it also includes equities and physical capital, but it is a good proxy of the U.S. in-
ternational indebtedness.
Current-account deficit can be
financed by a “structural surplus” in
the capital account
Lack of alternative locations for
investment
October 1, 2004 Current Issues
Economics 7
Such a sharp rise in foreign debt should not be surprising,
considering the piling up of current-account deficits in recent years.
What is surprising, though, is that the investment income/payments
balance has been in surplus (see table 1) despite the large and
rising debt. How to explain this apparent incongruity?
The main reason for the surplus in investment income despite the
rising U.S. indebtedness is that U.S. investments abroad are, in
aggregate, more profitable than foreign investments in the United
States.
This fact is primarily caused by a very large share of foreign official
assets in the U.S. due to the dollar’s function as the main reserve
currency. (Private capital flows, as mentioned before, have an oppo-
site characteristic as foreigners generally enjoy a higher return on
their investments in the U.S.)
As can be seen from table 2 (item 18), foreign official assets in the
U.S. reached USD 1.5 trillion at the end of last year, i.e. 60% or 55%
of U.S. net indebtedness (depending on the valuation method of
direct investments). In allocating their monetary reserves, foreign
central banks are primarily motivated by safety and liquidity rather
than by the rate of return. They invest these reserves mostly in U.S.
Treasury bills, which bring them relatively low returns.
In addition, U.S. currency owned by foreigners, which is practically
costless, reached USD 318 billion last year (item 27), bringing the
total of low- or no-cost U.S. liabilities to about 70% of net U.S. debt.
Moreover, foreign official assets and currency have, by a large, a
permanent character, similar to demand deposits at commercial
banks, further easing the burden of U.S. foreign indebtedness.
The balance of payments and the dollar
One of the most controversial issues of the U.S. international
economy is the relationship between the balance of payments and
the dollar exchange rate. Many economists believe that it is the
widening of the U.S. current-account deficit that is responsible for
the dollar decline during the past 2-3 years. Some even go further
by saying that it would be impossible to eliminate the deficit without
a massive, prolonged devaluation of the dollar.
These views are highly questionable. They ignore historic experi-
ence and they are based on an obsolete theory. If the weakening
dollar is mainly the result of rising external deficits, how to explain
the fact that between 1995 and 2001, when the U.S. current-account
deficit nearly quadrupled, the dollar was on a strongly rising trend.
Going back another 10 years to 1985, the Plaza Hotel Agreement
was a major international event aimed at pushing the dollar down,
with the main underlying objective of shrinking and eventually
eliminating the U.S. current-account deficit. This did not happen,
however, and the deficit rose to new highs.
The main underlying reason for the weak response of trade flows to
the dollar devaluation is the relative low price elasticity of both sides
of the U.S. trade balance. On the import side, for the dollar devalua-
tion to have a full effect on trade flows, two conditions must be ful-
filled: a) foreign exporters have to raise their prices to offset the cur-
rency loss, and b) domestic producers competing with imports have
to keep their prices constant in order to increase their market share
and shift demand away from imports to domestic production.
None of these conditions is fulfilled to the full extent. Foreign
exporters are reluctant to raise their dollar prices in order not to
jeopardize their competitive position in the huge and lucrative
American market. They often cut their profit margins and sometimes
-25
–
20
–
15
-10
-5
0
5
10
15
76 81 86 91 96 01
Net international investment
position
% GDP
0.00
0.25
0.50
0.75
1.00
1.25
70 75 80 85 90 95 00
Balance of investment income
% GDP
-600
-500
-400
-300
-200
-100
0
100
80 84 88 92 96 00
70
80
90
100
110
120
1
30
1
40
Current account & USD
Current
account
(right)
USD bn
USD nominal
trade-weighted rate (left)
2000=100
Current Issues October 1, 2004
8 Economics
even run temporary losses, all in order to keep their market shares.
Labor Department data on import prices clearly show this
phenomenon. For the past two years non-oil import prices have
risen only marginally.
Moreover, even when foreign exporters raise their prices, domestic
producers competing with imports often raise prices, too, under the
umbrella of higher import prices, thus defeating the macro-economic
purpose of devaluation. This had happened on a massive scale in
the 1985-1995 period when U.S. auto makers did not bother to go
for higher market shares; they raised their prices, knowing that
Americans will buy Japanese cars anyway because of their superior
quality.
Interestingly, these are not new phenomena, they have been known
for decades. Weak macro-economic effects of currency devaluation
were particularly visible during the devaluation of the British pound
in 1967. Since that time, if anything, devaluation effects have be-
come weaker still as trade flows shifted further away from commod-
ity-type trade toward capital equipment.
Similarly, on the export side, currency changes and the associated
changes in relative prices have had diminishing results on the trade
balance. This was especially clear during periods of the dollar ap-
preciation in the 1980s and 1990s. It did not hamper U.S. exports,
as theoretically expected. On the contrary, exports were running
strong since U.S. trade partners were willing to pay higher prices for
the U.S. technology, know-how and sophisticated capital goods.
A separate case is the possible revaluation of the Chinese yuan by
eliminating its fixed exchange rate to the dollar. This is strongly ad-
vocated by some economists and policymakers in view of the rapidly
rising U.S. trade deficits with China. But it is dubious that this would
really happen. The exchange rate of the yuan is a political issue
rather than an economic one; it is determined by the Chinese Polit-
bureau, not by market forces.
The dollar decline during the 2001-2004 period cannot be attributed
to any large extent to the widening U.S. trade and current-account
deficits. The main contributing factors were a) exceptionally wide
interest ride differentials between the U.S. and other industrial
nations as U.S. rates fell to their lowest levels in over 40 years, b)
the September 11 events and constant fears of further terrorist
attacks, and c) a change in the attitude of the U.S. toward the dollar
as clear signs emerged that the Bush administration is not unhappy
with the weaker dollar, in contrast with the strong-dollar policy of the
second Clinton administration.
All together, a dollar devaluation is not likely to solve the deficit prob-
lem (if there is one), and may disappoint those who advocate it. On
the contrary, from the policy standpoint, it may have a negative im-
pact on the U.S. economy. Considering that it is capital flows rather
than trade flows that determine the dollar exchange rate, devalua-
tion might hamper the financing of the deficit without reducing it to
any large extent.
Concluding remarks
The persistence of U.S. external deficits and the associated rise of
U.S. international debt have led to widespread worries and fears as
to how long this condition may last and how could it be rectified.
Closer examination of this issue shows, however, that the worries
are far from justified and the fears greatly exaggerated, for the fol-
lowing main reasons:
-30
-20
-10
0
10
20
30
40
80 82 84 86 88 90 92 94 96 98 00 02
Exports & USD
Exports
% yoy
USD nominal
effective exchange rate
-20
-15
-10
-5
0
5
10
15
90 92 94 96 98 00 02 04
Import prices & USD
Import prices % yoy
USD nominal
effective exchange rate
October 1, 2004 Current Issues
Economics 9
• The primary cause of U.S. trade deficits is disparity of economic
growth, with the U.S. growing faster than most other industrial
nations due to demographic and productivity factors. Sure, a
deep and protracted recession in America could possibly reverse
the rising deficit trend. But, obviously, the cure would be worse
than the disease. The U.S. is thus a victim of its own success.
The deficit is a reflection of U.S. strength not weakness.
• Even when disregarding the growth disparity, the U.S. would still
run external deficits for a number of structural reasons, the most
important of which are: a) high income elasticity of imports, b)
spreading industrial cooperation and outsourcing, c) the dollar’s
function as the key global reserve currency.
• Although the accumulation of current-account deficits raised U.S.
international debt to about one-quarter of its GDP, the structure
of the debt is highly advantageous as about 70% of it constitutes
liabilities to foreign central banks and U.S. currency owned by
foreigners. Both sources have pretty permanent characteristics
and, above all, very low cost of financing or are outright costless.
• The depreciation of the dollar is not likely to change much the
balance of payments deficit but it may jeopardize its financing.
So, all together, does the U.S. have a problem with its external
deficits? If it does, the problem certainly pales in comparison with
major long-term problems, such as the unfunded liabilities of the
Social Security system in view of the forthcoming retirement of the
baby-boom generation, the explosive rise in health-care costs, and
the growing dependence on oil imports from volatile areas of the
world.
Most important, as the paper was trying to demonstrate, if it is a
problem, there are no immediate solutions of the problem. And to
quote another Herb Stein’s one-liner, “if there is no solution to a
problem, there is no problem.”
Finally, an important mitigating circumstance is that it is mostly
economists and politicians who worry about the external deficits.
The general public does not lose sleep over the issue, which only
attests to the common sense of the American people.
Mieczyslaw Karczmar, +1 212 586-3397 (mkarczmar@aol.com)
Economic Adviser to DB Research
Current Issues October 1, 2004
10 Economics
Table 1: U.S. Balance of Payments
(in billions of dollars)
I. Current Account 2002 2003 2004*
Exports of goods 681.8 713.1 791.5
Imports of goods -1164.7 -1260.7 -1400.2
Merchandise Trade Balance -482.9 -547.6 -608.7
Income from services 294.1 307.3 334.3
Payments for services -232.9 -256.3 -283.4
Services Balance 61.2 51.0 50.9
Income from U.S. assets abroad 266.8 294.4 340.8
Payments on foreign assets in the U.S. -259.6 -261.1 -311.2
Investment Income/Payments Balance 7.2 33.3 29.6
Unilateral Transfers -59.4 -67.4 -78.8
Current-Account Balance -473.9 -530.7 -607.0
II. Capital (Financial) Account (private)
Foreign direct investment 72.4 39.9 85.8
Foreign portfolio investment 385.9 365.4 503.4
Bank borrowing 96.4 75.6 343.5
Other 99.5 100.7 85.0
Capital inflow 654.2 581.6 1017.7
U.S. direct investment abroad -134.8 -173.8 -216.7
U.S. portfolio investment abroad 15.9 -72.3 -93.7
Bank lending -30.3 -10.4 -436.0
Other -46.4 -32.5 -108.8
Statistical discrepancy -95.0 -12.0 57.3
Capital outflow -290.6 -301.0 -797.9
Capital-Account Balance 363.6 280.6 219.8
III. Balance of Payments -110.3 -250.1 -387.2
IV. Official Reserve Transactions
Decline (+) /Increase (-) in U.S. official reserve assets -3.7 1.5 3.4
Increase in foreign official assets in the U.S. 114.0 248.6 383.8
*) Forecast
Source: US Department of Commerce, own calculation and regroupings
October 1, 2004 Current Issues
Economics 11
Line Type of investment Position, Position
2002r 2003p
Net international investment position of the United States:
1 With direct investment positions at current cost (line 3 less line 16)……………………………………………………………………………………………………………………………..-2,233,018 -2,430,682
2 With direct investment positions at market value (line 4 less line 17)……………………………………………………………………………………………………………………………..-2,553,407 -2,650,990
U.S.-owned assets abroad:
3 With direct investment at current cost (lines 5+6+7)……………………………………………………………………………………………………………………………..6,413,535 7,202,692
4 With direct investment at market value (lines 5+6+8)……………………………………………………………………………………………………………………………..6,613,320 7,863,968
5 U.S. official reserve assets……………………………………………………………………………………………………………………………..158,602 183,577
6 U.S. Government assets, other than official reserve assets……………………………………………………………………………………………………………………………..85,309 84,772
U.S. private assets:
7 With direct investment at current cost (lines 9+11+14+15)……………………………………………………………………………………………………………………………..6,169,624 6,934,343
8 With direct investment at market value (lines 10+11+14+15)……………………………………………………………………………………………………………………………..6,369,409 7,595,619
Direct investment abroad:
9 At current cost……………………………………………………………………………………………………………………………..1,839,995 2,069,013
10 At market value……………………………………………………………………………………………………………………………..2,039,780 2,730,289
11 Foreign securities……………………………………………………………………………………………………………………………..1,846,879 2,474,374
12 Bonds……………………………………………………………………………………………………………………………..501,762 502,130
13 Corporate stocks……………………………………………………………………………………………………………………………..1,345,117 1,972,244
14 U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns……………………………………………………………………………………………………………………………..908,024 614,672
15 U.S. claims reported by U.S. banks, not included elsewhere……………………………………………………………………………………………………………………………..1,574,726 1,776,284
Foreign-owned assets in the United States:
16 With direct investment at current cost (lines 18+19)……………………………………………………………………………………………………………………………..8,646,553 9,633,374
17 With direct investment at market value (lines 18+20)……………………………………………………………………………………………………………………………..9,166,727 10,514,958
18 Foreign official assets in the United States……………………………………………………………………………………………………………………………..1,212,723 1,474,161
Other foreign assets:
19 With direct investment at current cost (lines 21+23+24+27+28+29)……………………………………………………………………………………………………………………………..7,433,830 8,159,213
20 With direct investment at market value (lines 22+23+24+27+28+29)……………………………………………………………………………………………………………………………..7,954,004 9,040,797
Direct investment in the United States:
21 At current cost……………………………………………………………………………………………………………………………..1,505,171 1,553,955
22 At market value……………………………………………………………………………………………………………………………..2,025,345 2,435,539
23 U.S. Treasury securities……………………………………………………………………………………………………………………………..457,670 542,542
24 U.S. securities other than U.S. Treasury securities……………………………………………………………………………………………………………………………..2,786,647 3,391,050
25 Corporate and other bonds……………………………………………………………………………………………………………………………..1,600,414 1,852,971
26 Corporate stocks……………………………………………………………………………………………………………………………..1,186,233 1,538,079
27 U.S. currency……………………………………………………………………………………………………………………………..301,268 317,908
28 U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns……………………………………………………………………………………………………………………………..864,632 466,543
29 U.S. liabilities reported by U.S. banks, not included elsewhere……………………………………………………………………………………………………………………………..1,518,442 1,887,215
p Preliminary.
r Revised.
Source: US Department of Commerce, Bureau of Economic Analysis
Table 2: International Investment Position of the United States at Yearend, 2002 and 2003
[Millions of dollars]
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- October 1, 2004
- The U.S. balance of payments: widespread misconceptions and exaggerated worries
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October 1, 2004
The U.S. balance of payments: widespread misconceptions and exaggerated worries
