More Missing Trillions!!??

Some time back I realized that the 2+ trillion I thought was missing from the Pentagon was a misunderstanding on my part of how these things work.

Perhaps I was looking in the wrong place...

Christian Scientist Monitor:

The mystery of the missing $2.9 trillion

Economists scour the US to find out why we're more in debt than the Department of Commerce says we are.

By David R. Francis | columnist

from the October 29, 2007 edition

Like most people, economists love a mystery – especially if it involves not a missing person but a missing $2.9 trillion in United States debt.

That's $2.9 with 11 zeros after it.

Some words of explanation: Every quarter the Department of Commerce comes up with the US "International Investment Position." At the end of 2006, for instance, the US had a net negative position – by this measurement of international assets and liabilities – of $2.6 trillion. In other words, the country is by far the world's biggest debtor nation.

A quarter century ago, the US was the world's largest creditor nation.

The economists at Commerce count American-owned private assets in foreign nations (plants, equipment, retail outfits, property, corporate stocks and bonds, etc.), US official international reserves (gold, special drawing rights, foreign currencies), and other US assets abroad. The measurements get complicated. Then these economists count what foreigners own of American assets, looking at the same list of assets.

Subtracting the value of American international assets from what foreigners own of American assets, they come up with how much Americans are in debt to other nations and their peoples.

But if you look at the current account of the US balance of payments, which measures primarily the balance of trade, and also flows of interest and dividends, foreign aid, and other international transfers, the US should be far deeper in hock – $2.9 trillion more over the years from 1990 through 2006 than the official $2.6 trillion. Every month, the Commerce Department has reported huge deficits in trade and the broader current account. These deficits have to be financed somehow by foreigners, and so the US should be piling up its international debts in grand style.

[. . .]

There's more to the mystery than that, however. One advantage for the US is that the dollar is the primary currency used in international reserves of other nations and for invoicing international trade and investment, such as for oil and other commodities.

So when the dollar loses value, foreign holders of dollar assets lose on their dollar investments. Almost all US foreign liabilities are in dollars and about 70 percent of US foreign assets are in foreign currencies.In what Gourinchas calls an "eye-catching, back-of-the-envelope calculation," a 10 percent depreciation of the dollar represents a transfer of 5.3 percent of US GDP from the rest of the world to the US. America's GDP is currently $13.7 trillion, and the dollar is down 20.6 percent since 2002. So foreigners have – in effect – given the US about $1.3 trillion.

It's not really that simple, emphasizes Gourinchas. Nonetheless, the US has had a free lunch.

http://www.blogger.com/img/gl.link.gifJust how much does the US owe the world?

More cheery news from Paul Craig Roberts in Online Journal:

The US now has a trade deficit with every part of the world. In 2006 (the latest annual data), the US had a trade deficit totaling $838,271,000,000.

The US trade deficit with Europe was $142,538,000,000. With Canada the deficit was $75,085,000,000. With Latin America it was $112,579,000,000 (of which $67,303,000,000 was with Mexico). The deficit with Asia and Pacific was $409,765,000,000 (of which $233,087,000,000 was with China and $90,966,000,000 was with Japan). With the Middle East the deficit was $36,112,000,000, and with Africa the US trade deficit was $62,192,000,000.

Public worry for three decades about the US oil deficit has created a false impression among Americans that a self-sufficient America is impaired only by dependence on Middle East oil. The fact of the matter is that the total US deficit with OPEC, an organization that includes as many countries outside the Middle East as within it, is $106,260,000,000, or about one-eighth of the annual US trade deficit.

Moreover, the US gets most of its oil from outside the Middle East, and the US trade deficit reflects this fact. The US deficit with Nigeria, Mexico, and Venezuela is 3.3 times larger than the US trade deficit with the Middle East despite the fact that the US sells more to Venezuela and 18 times more to Mexico than it does to Saudi Arabia.

What is striking about US dependency on imports is that it is practically across the board. Americans are dependent on imports of foreign foods, feeds, and beverages in the amount of $8,975,000,000.

Americans are dependent on imports of foreign Industrial supplies and materials in the amount of $326,459,000,000 -- more than three times US dependency on OPEC.

Americans can no longer provide their own transportation. They are dependent on imports of automotive vehicles, parts, and engines in the amount of $149,499,000,000, or 1.5 times greater than the US dependency on OPEC.

In addition to the automobile dependency, Americans are 3.4 times more dependent on imports of manufactured consumer durable and nondurable goods than they are on OPEC. Americans no longer can produce their own clothes, shoes, or household appliances and have a trade deficit in consumer manufactured goods in the amount of $336,118,000,000.

The US “superpower” even has a deficit in capital goods, including machinery, electric generating machinery, machine tools, computers, and telecommunications equipment.

What does it mean that the US has a $800 billion trade deficit?

It means that Americans are consuming $800 billion more than they are producing.