Foreign Investment in U.S. Securities [Updated July 14, 2008]   [open pdf - 152KB]

From the Summary: "Foreign capital inflows are playing an important role in the U.S. economy by bridging the gap between domestic supplies of and demand for capital. Foreign investors now hold more than 50% of the publicly held and traded U.S. Treasury securities. The large foreign accumulation of U.S. securities has spurred some observers to argue that this large foreign presence in U.S. financial markets increases the risk of a financial crisis, whether as a result of the uncoordinated actions of market participants or by a coordinated withdrawal from U.S. financial markets by foreign investors for economic or political reasons. […] Despite improvements in capital mobility, foreign capital inflows do not fully replace or compensate for a lack of domestic sources of capital. Economic analysis shows that a nation's rate of capital formation, or domestic investment, seems to have been linked primarily to its domestic rate of saving. To date, the world economy has benefited from the stimulus provided by the nation's combination of fiscal and monetary policies and trade deficit. Over the long run, however, concerns are growing that U.S. economic policies and the accompanying large deficit in its international trade accounts could have a negative impact on global economic developments, especially for developing countries. This report relies on a comprehensive set of data on capital flows, represented by purchases and sales of U.S. government securities and U.S. and foreign corporate stocks, bonds, into and out of the United States, that is reported by the Treasury Department on a monthly basis. This report will updated as events warrant."

Report Number:
CRS Report for Congress, RL32462
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