Sunday, July 06, 2008

Foreign-Owned Assets in U.S. Top $20 Trillion


According to data just released by the BEA on the "U.S. Net International Investment Position at Yearend 2007," foreign-owned assets in the United States increased $3,474 billion in 2007 to $20,081 billion (see top chart above), representing the largest-ever annual dollar increase, and the largest percentage increase in 20 years (see bottom chart above) for foreign investment in the U.S.

From the highlights:

Foreign private holdings of U.S. securities (other than U.S. Treasury securities) increased $760 billion to $6.1 trillion. Foreign holdings of U.S. bonds increased to $3.3 trillion mostly as a result of net foreign purchases, and foreign holdings of U.S. stocks increased to $2.8 trillion as a result of both net foreign purchases and price appreciation.

The stock of foreign direct investment in the United States increased $271 billion to $2.42 trillion.

Bottom Line: Despite subprime mortgage and credit problems, a weak economy and real estate market, foreign investors expressed their continued confidence in the U.S. economy, by buying our stocks and bonds, and investing billions of dollars in American companies.

15 Comments:

At 7/06/2008 4:17 PM, Anonymous The Masked Millionaire said...

It seems that every time the US economy hits a speed bump, people world over start to panic.

The cry goes out, "The sky is falling."

Over 230 years later...the sky hasn't fallen.

I sleep better with the majority of my money invested in:

A. USA
B. China
C. Russia
D. India

The correct answer...A

The Masked Millionaire

 
At 7/06/2008 4:31 PM, Blogger Sean Cooksey said...

You could look at the geographical shifts of where this foreign investment is coming from. My guess is that within the last thirty or so years there's been an enormous shift from Europe to the oil rich MidEast nations and China, especially because trade deficits have given them such large stockpiles of American dollars.

Unlike many politicians and the general public, we can see this is a good thing. Still, be wary of the overly zealous Left crying worker and consumer oppression and the overly paranoid Right crying national security. Both are uninformed soundbites for limiting foreign investment.

 
At 7/06/2008 5:44 PM, Blogger SBVOR said...

Dr. Perry,

Off topic, but…

You might find something of interest in this post and this report.

 
At 7/06/2008 6:00 PM, Blogger Craig said...

Interesting, isn't it, how so many people will consider this threatening news and proof of our decline as an international power.

 
At 7/06/2008 6:27 PM, Blogger Walt G. said...

At the same time as foreign investment increased in the U.S., U.S. businesses have been investing overseas. It doesn't appear that capital respects borders anymore. As a matter of fact, corporate C.E.O.s in the U.S. used to keep a United States flag in their offices; now they keep a world globe.

Is this good or bad? It doesn't really matter. It just is, so everyone better find a way to deal with it or get left behind. There are a lot of great opportunities in the globalized marketplace for those willing to give it a chance.

 
At 7/06/2008 6:29 PM, Anonymous Theinvestingspeculator said...

That is great. we can just piss away this countries wealth because of a weak dollar and over-consumption. Times are tuff for everyone except the super rich. They expect to spend more this year according to CNBC. Eli Broad said this is the worst economy since WWII. I will tell you why @
www.theinvestingspeculator.com

 
At 7/06/2008 8:14 PM, Anonymous Anonymous said...

Sell Italian bonds. Italian public debt has reached a record high at 1646,7 billion euros.It is worse than 1992 when the country went very near to declare default(insolvency)

 
At 7/07/2008 2:29 AM, Blogger Sean Hackbarth said...

Foreign investors see a buying opportunity. Capital isn't dumb, not when there's money to be made.

 
At 7/07/2008 10:57 AM, Blogger juandos said...

Ahhh, Theinvestingspeculator thinks this liberal Democrat has something to offer...

Maybe but maybe its just more Warren Buffet with a different name...

 
At 7/07/2008 12:09 PM, Blogger spencer said...

Now would you care to explain how selling out productive assets to foreigners to finance consumer spending and a federal deficit is a good thing.

 
At 7/07/2008 4:23 PM, Anonymous Anonymous said...

Another year. Another sharecropper year in the US net international investment position (NIIP). Without the decline in King Dollar and the derivatives account, another trillion$ went bye bye.

Oh, what's the point? "US Assets Owned Abroad Top $17 trillion".

 
At 7/07/2008 5:02 PM, Blogger OBloodyHell said...

> The correct answer...A

...If you have only one. The actual correct choice is not listed:

E. All the Above.

Most of it should be in the USA, sure, but a good chunk ought to be in India, with a nice additional amount in the other two -- call it 70-5-5-20.
Remember the Risk-Rule of Thumb:
Never put all your eggs in one basket.

 
At 7/07/2008 5:09 PM, Blogger OBloodyHell said...

> Is this good or bad? It doesn't really matter. It just is,

Walt, by no means is it irrelevant.

When everyone's economy depends on other peoples' it strongly -- emphasis on strongly -- discourages war as a solution to problems.

Everyone's interests interlock, so that if I start a war with country X, that hurts countries Y and Z, which means that *I* suffer because of my trade relations with Y and Z.

So I am very strongly discouraged to use war as an option.

About now some genius is going to trot out The Broken Window Fallacy, but that will only mark economic cluelessness.

Interlocking economies do have some downsides -- it means that a downturn in one hurts the other -- but that also has a beneficial side. With them interlocked, money flows readily from one to the other, allowing investors to swiftly punish those governments which act cluelessly and/or stupidly. This leads to them getting tossed out of power, and another bunch (hopefully smarter and wiser) get installed.

Look at Brown in the UK. Stupid policies, and his government is suffering for it. OTOH, Ireland's economy is booming. Smart moves brings smart money.

 
At 7/07/2008 5:15 PM, Blogger OBloodyHell said...

> That is great. we can just piss away this countries wealth because of a weak dollar and over-consumption...

Yeah! Tax 'em all! Rich, thieving, money-grubbing bastards!! Make 'em poor, like the homeless! Steal their money!

Yeesh.

Clue <--- Get one, they are FREE!

 
At 7/08/2008 7:58 AM, Blogger Walt G. said...

obloodyhell,

I was implying that economic change is inevitable. We can't expect the next 50 years to look like the last 50 years. Ozzie and Harriet and 50-cent-gas are gone forever.

On the other hand, war in not inevitable. I realize that war and economies are linked, but I was not exploring that linkage. I knew as soon as I saw the title of the post what the arguments would be, and I wanted to argue to accept the fact that we are now in the 21st century and the economic models have and will continue to change.

 

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