{ "id": "RS21951", "type": "CRS Report", "typeId": "REPORTS", "number": "RS21951", "active": false, "source": "EveryCRSReport.com, University of North Texas Libraries Government Documents Department", "versions": [ { "source": "EveryCRSReport.com", "id": 350213, "date": "2009-06-29", "retrieved": "2016-04-07T02:24:24.329157", "title": "Financing the U.S. Trade Deficit: Role of Foreign Governments", "summary": "The nation\u2019s trade deficit is equal to the imbalance between national investment and national saving. National saving is the sum of household saving, business saving, and public sector saving (a budget deficit equals public sector borrowing). Over the period 2001-2006, the gap between national saving and investment widened, largely because of a fall in private and public saving, causing the trade deficit to widen. (It declined somewhat in both 2007 and 2008 relative to GDP.) To finance the trade deficit, foreign capital must flow into the United States.\nNet private capital inflows have not grown over this period, however, to match the widening gap between saving and investment. The growing trade deficit from 2002 through 2006 was increasingly financed by official capital inflows as central banks and treasuries in a few Asian and oil-producing countries accumulated U.S. assets, arguably as a precautionary reserve should another Asian-type financial crisis emerge, to make use of windfall earnings resulting from high commodity prices, and to moderate or prevent their currencies from appreciating against the dollar. Net official capital inflows were close to $400 billion in both 2006 and 2007. \nThe financial turmoil and economic contraction during 2008 reduced the gap between national saving and investment. The result was a decline in the trade deficit and the net inflow of capital. It also appears to have had a significant effect on the composition of international capital flows both from and to the United States. Between 2007 and 2008, foreign private capital inflows declined by more than 97%, while foreign official inflows rose by some 1.3%. As a result, official inflows rose from about 30% of private inflows in 2007 to more than 10 times as large in 2008. U.S. private capital outflows shifted to an inflow in 2008 as U.S. investors withdrew assets from the rest of the world. U.S. official outflows, which had been miniscule in 2007, grew to some $530 billion in 2008, largely reflecting currency swaps between the Federal Reserve and foreign central banks. Because the net official movement of capital was outward from the United States, the net inflow was dominated by private capital. This, in turn, came not from foreign investors but from the liquidation and repatriation of American-owned assets abroad.\nWhile the net inflow of capital continued during the first quarter of 2009, it underwent yet another compositional change. Rather than an outflow of U.S. capital, there was an inflow. That inflow arose because the repayment of official loans dominated the outflow of private capital by more than 2-to-1. Foreign lending also changed. Private lending was negative in the sense that foreign holders of investments in the United States liquidated them. Official lending to the United States was still positive, but only about half the size of the private outflow. Thus, the net inflow of capital was dominated by the repayment of U.S. government loans and the continued lending by foreign official sources. \nIf total net capital inflows decline, mainstream economics suggests, all else held constant, that the dollar and trade deficit would decline, U.S. interest rates would rise, and U.S. spending on capital goods and consumer durables would fall, all else equal. This report will be updated as events warrant.", "type": "CRS Report", "typeId": "REPORTS", "active": false, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/RS21951", "sha1": "28b2d1220bf65acb305b0b5dcf00e6b442f597f1", "filename": "files/20090629_RS21951_28b2d1220bf65acb305b0b5dcf00e6b442f597f1.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/RS21951", "sha1": "48a341098b36436b90faa510f84772bc7ea8f958", "filename": "files/20090629_RS21951_48a341098b36436b90faa510f84772bc7ea8f958.pdf", "images": null } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc816192/", "id": "RS21951_2008May20", "date": "2008-05-20", "retrieved": "2016-03-19T13:57:26", "title": "Financing the U.S. Trade Deficit: Role of Foreign Governments", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20080520_RS21951_f0fc517a22f1734f7360662abd09226d2e761d4b.pdf" }, { "format": "HTML", "filename": "files/20080520_RS21951_f0fc517a22f1734f7360662abd09226d2e761d4b.html" } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc822462/", "id": "RS21951_2006Jul05", "date": "2006-07-05", "retrieved": "2016-03-19T13:57:26", "title": "The U.S. Trade Deficit: Role of Foreign Governments", "summary": "The nation\u2019s trade deficit is equal to the imbalance between national investment and national saving. This report discusses several trends in U.S. trade balance and what they mean for the economy.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20060705_RS21951_0b05ce9ae767062ab9bb8719ba349ea353d01d03.pdf" }, { "format": "HTML", "filename": "files/20060705_RS21951_0b05ce9ae767062ab9bb8719ba349ea353d01d03.html" } ], "topics": [ { "source": "LIV", "id": "Trade", "name": "Trade" }, { "source": "LIV", "id": "Balance of trade", "name": "Balance of trade" }, { "source": "LIV", "id": "Foreign trade", "name": "Foreign trade" } ] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metadc815037/", "id": "RS21951_2005Apr22", "date": "2005-04-22", "retrieved": "2016-03-19T13:57:26", "title": "Changing Causes of the U.S. Trade Deficit", "summary": null, "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20050422_RS21951_0357ec8aa16a219c5d122bea6a45fe3fc4e83a77.pdf" }, { "format": "HTML", "filename": "files/20050422_RS21951_0357ec8aa16a219c5d122bea6a45fe3fc4e83a77.html" } ], "topics": [] }, { "source": "University of North Texas Libraries Government Documents Department", "sourceLink": "https://digital.library.unt.edu/ark:/67531/metacrs6077/", "id": "RS21951 2004-10-12", "date": "2004-10-12", "retrieved": "2005-06-12T13:12:00", "title": "Changing Causes of the U.S. Trade Deficit", "summary": "The nation\u2019s trade deficit is equal to the imbalance between national investment and national saving. The borrowing needs of the U.S. private sector declined, the public sector borrowing needs increased, and a stable U.S. national saving investment gap continued to be filled by foreign lending as a result. This is largely the result of a few Asian countries purchasing U.S. assets to mitigate or prevent their currencies from appreciating against the dollar.", "type": "CRS Report", "typeId": "REPORT", "active": false, "formats": [ { "format": "PDF", "filename": "files/20041012_RS21951_af1edc20288a6fd8735616f9854f0bf4539813fe.pdf" }, { "format": "HTML", "filename": "files/20041012_RS21951_af1edc20288a6fd8735616f9854f0bf4539813fe.html" } ], "topics": [ { "source": "LIV", "id": "Trade", "name": "Trade" }, { "source": "LIV", "id": "Balance of trade - U.S.", "name": "Balance of trade - U.S." } ] } ], "topics": [] }