Thursday, August 1, 2019

Joseph P. Joyce — The Change in the U.S. Direct Investment Position

The U.S. has long held an external balance sheet that is comprised of foreign equity assets, mainly in the form of direct investment (DI), and liabilities held abroad primarily in the form of debt, including U.S. Treasury securities. This composition is known “long equity, short debt.” Pierre-Olivier Gourinchas of UC-Berkeley and Hélène Rey of the London Business School claim that this allocation has allowed the U.S. to serve as the “world’s venture capitalist,” issuing short-term debt in order to invest in high-yield assets. But the U.S. direct investment position has changed from a surplus to a deficit, with uncertain consequences for the international monetary system.
There is more than one reason for the change....
Angry Bear
The Change in the U.S. Direct Investment Position
Joseph P. Joyce | Professor of Economics at Wellesley College, where he holds the M. Margaret Ball Chair of International Relations. He served as the first Faculty Director of the Madeleine Korbel Albright Institute for Global Affairs.

1 comment:

Matt Franko said...

"When changes in U.S. tax laws went into effect last year, many firms brought their earnings back, which led to negative U.S. direct investment outflows."

No they didn't... More reification error here ("brought back!" "outflows!") guy doenst understand the accounting abstractions goes directly to reification error, thinks "money!" is real .. unqualified... needs to take some accounting courses ...

they accrued the reduction in asset value of offshore tax deferral assets caused by the Trump tax law passed late 4Q 2017... the new Trump tax law allows the firms 7 years to pay the taxes ... but the firms accrued the tax loss immediately via their Accrual Basis they use...

These accrued tax losses (-$40b to bank system capital at the time) caused the big sell off in 1Q 2018....