NCPA - National Center for Policy Analysis

Uncle Sam's Debt May Be Smaller Than Perceived

April 16, 2002

The U.S. may not be as big an international debtor as generally thought, because official data overstate how much it owes to foreigners, according to a Federal Reserve study.

  • Capital-flow data may substantially overstate the amount of U.S. bonds held by foreigners -- and understate the amount of foreign stocks held by U.S. investors, the study says.
  • That would help explain why debt levels are not causing a big retrenchment in the value of the dollar.
  • The net international investment position of the U.S. at year-end 2000 was negative $1.84 trillion -- when direct investment is valued at current costs, rather than market value.
  • Experts suggest that the U.S. position as a net debtor could be overstated by about $600 billion -- or 30 percent.

Source: Tyler Lifton, "U.S. Global Debt May Be Smaller, Fed Study Finds," Wall Street Journal, April 16, 2002; Francis E. Warnock and Chad Cleaver, "Financial Centers and the Geography of Capital Flows," International Finance Discussion Papers No. 722, April 2002, Board of Governors of the Federal Reserve System.

For Fed study


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