Sources:
Census Foreign Trade (http://www.census.gov/foreign-trade/statistics/historical/)
Treasury International Capital (http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/shlhistdat.txt)
Trade surplus/deficit data from the Census shows a very disturbing trend with the US balance of payments showing a strong trend of increasing deficits. The first thought I had was that an increasing reliance on foreign oil imports was the main driver. However, digging into the details, I found that in 1994, oil accounted for 93% of the cost of imported goods. In 2010, oil accounted for only 29% of the cost of imported goods. The US is still a net exporter of services but it doesn't come close to the amount of goods we import.
My next thought was what happens to all of those dollars sent outside the US? There are two main places they can go. They can be used to buy Treasury securities (bills, notes, bonds) and they can buy US assets (land, companies, corporate bonds and stocks). I tracked down the foreign owned US securities form the Treasury International Capital system and found a steady accumulation of US debt and assets by foreigners recycling their dollars (shocker!).
It's not just US jobs that are moving overseas, it is ownership of the US itself. The growth of foreign held US federal debt is one dimension of concern, but more troubling to me is the increasing ownership of US corporations by foreigners (e.g., Anheiser-Busch bought by Belgium based InBev). The US has denied sales of "strategic" companies to foreign interests (e.g. Union Oil), but eventually those dollars have to come back in the form of either debt or equity ownership. The trend is not our friend.
Update: Here is Real Surplus/Trade (inverted) vs. Real Foreign Owned US Securities as suggested:
If you adjust the cumulative surplus/deficit for inflation in each time period and then flip the scale you would see nearly perfect correlation.
ReplyDeleteTo not adjust it for inflation implies that the cash we sent overseas decades ago was simply buried in backyards. It wasn't though. It was reinvested in things that for the most part kept up with inflation.
In other words, if we sent a billion dollars overseas in 1987 that's similar to sending two billion dollars overseas now (the CPI has doubled since then).
Just a thought.
Mark,
ReplyDeleteInteresting. I'll do that in an update. I am also working on US investments in foreign securities for comparison.
No matter how a person interprets these numbers, it must be seen as an economy busting situation. Now Congress is playing a game of "Chicken" between the Republicans and Democrats. Hanging in the balance is the Standard and Poor, & Moody ratings of U.S. T. Bills. Both ratings agencies have publically stated they will have to downgrade the saftey of our T. Bills if Congress doesn't raise the debt ceiling. According to NPR, a deal must be made by July 22 in order to get a bill written and passed before Default Day Aug. 5.
ReplyDelete