Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, July 1, 1993 TAG: 9307010117
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Direct Japanese holdings in the United States rose 4.1 percent to $96.7 billion, while British investment fell 5.6 percent to $94.7 billion. Japanese holdings exceeded British holdings for the first time.
Investment by the Dutch rose 3.3 percent to $61.3 billion, solidifying the Netherlands' place as the third-largest holder of direct assets in the United States, defined as at least 10 percent ownership in a business.
Canada was fourth, with $39 billion in U.S. holdings, up 4.5 percent, followed by Germany, $29.2 billion, up 2.1 percent.
The increases contributed to a sharp deterioration in the United States' net debtor position - the difference between what Americans own overseas and what foreigners own in this country.
The country-by-country list, issued annually by the Commerce Department, values the holdings by their purchase price. However, the overall net debtor figure is presented using two other accounting methods.
One method, which values holdings at their current replacement cost, showed the U.S. net debtor position soaring 42.9 percent from $364.9 billion in 1991 to $521.3 billion last year.
The other method, which values holdings by their stock market prices, showed a debt increase of 54.3 percent to $611.5 billion.
As recently as 1983, America was the world's largest creditor, with U.S. funds financing projects around the globe. But the flow of funds reversed as Americans developed an insatiable appetite for foreign goods and their government began to run large budget deficits.
By the replacement cost method, the United States became a net debtor in 1987 and by the stock value method, in 1989.
During the 1980s, politicians and economists decried the trend as a symbol of Americans losing control of their economic destiny to foreigners. They warned that eventually the U.S. standard of living would slip as foreign owners reaped the benefits from their holdings rather than Americans.
However, the Commerce Department said the most recent deterioration in the net debtor position had more to do with strong price gains in U.S. stock and bond markets and with the strengthening of the dollar versus European and Canadian currencies.
Foreigners were particularly keen on buying Treasury securities last year. Their holdings increased $35.4 billion to $224.9 billion - an amount equal to roughly 5 percent of the national debt.
"The overall deterioration in our debt position is not good," said economist Allen Sinai of Economic Advisers Inc. "It reflects the fact that we still must work to improve our trade deficit."
However, he said, "the heavy inflows of financial capital into our markets are a sign of growing overseas confidence in the United States that reflects such things as the U.S. coming to grips with the deficit problem and the expectation that our economy will be improving."
The total net debtor figure is not in the classic sense debt, because it includes not only bank loans, which must be repaid, but also investments in corporate stock and real estate, which do not have to be repaid. However, it does represent the amount that would have to be produced if for some reason foreigners suddenly decided to liquidate all of their U.S. holdings.
The overall level of U.S. holdings abroad was little changed. Investment rose 16.6 percent in Latin America to $88.9 billion and 5.1 percent in Japan to $26.2 billion. But it fell 0.6 percent to $68.4 billion in Canada and declined 0.3 percent to $77.8 billion in Britain.
by CNB