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The U.S. net international investment position at yearend 2008 was -$3,469.2 billion (preliminary), as the value of foreign investments in the United States continued to exceed the value of U.S. investments abroad (table 1). At yearend 2007, the U.S. net international investment position was -$2,139.9 billion (revised). The -$1,329.3 billion change in the U.S. net investment position from yearend 2007 to yearend 2008 resulted from (1) declines in the prices of U.S.-held foreign stocks that surpassed declines in the prices of foreign-held U.S. stocks, (2) the depreciation of most major currencies against the U.S. dollar that lowered the dollar value of U.S.-owned assets abroad, and (3) net foreign acquisitions of financial assets in the United States that exceeded net U.S. acquisitions of financial assets abroad. The impact of these differences was partly offset by “other” changes (such as changes in reporting panels and capital gains and losses) that raised the value of U.S.-owned assets abroad and lowered the value of foreign-owned assets in the United States. The following are highlights for 2008: * Foreign acquisitions of financial assets in the United States, excluding financial derivatives, were $534.1 billion in 2008, down substantially from $2,129.5 billion in 2007. In 2008, foreign acquisitions of Treasury securities and foreign direct investment in the United States were especially strong. In contrast, foreign residents sold more U.S. securities other than Treasury securities than they purchased, and U.S. banks’ and nonbanks’ liabilities to foreign residents fell sharply. * U.S. acquisitions of financial assets abroad, excluding financial derivatives, were $0.1 billion in 2008, down substantially from $1,472.1 billion in 2007. In 2008, U.S. banks’ and nonbanks’ claims against foreign residents fell sharply and U.S. residents sold more foreign securities than they purchased. However, U.S. direct investment abroad remained robust and U.S. government holdings of foreign currencies increased substantially as a result of unprecedented net drawings on temporary reciprocal currency arrangements between the U.S. Federal Reserve System and foreign central banks. * U.S. holdings of financial derivatives as assets (with positive gross value) increased $4,065.2 billion, and as liabilities (with negative gross value) increased $3,977.1 billion. These large changes are mainly due to increases in U.S. claims and liabilities from interest rate swap contracts, caused by sharp declines in yields on interest rate swaps in the first and fourth quarters of 2008. Because changes to U.S. assets and liabilities are offsetting, they have little impact on the net investment position. * Declining prices in most foreign stock markets lowered the value of U.S. holdings of foreign stocks by a large amount. Declining prices in the U.S. stock market also lowered the value of foreign holdings of U.S. stocks, but by a smaller amount. In 2008, prices of financial assets such as corporate stocks and bonds fell sharply but prices of U.S. Treasury securities and other high-grade government bonds appreciated, reflecting unsettled global financial market conditions and aggressive interest rate cuts from the Federal Reserve and other central banks. * Depreciation of most major foreign currencies against the U.S. dollar from yearend 2007 to yearend 2008 substantially lowered the dollar value of U.S.- owned assets abroad, especially the value of U.S.-owned foreign stocks. U.S.-owned assets abroad increased $1,609.3 billion to $19,888.2 billion. U.S. holdings of financial derivatives as assets (with positive gross value) increased $4,065.2 billion to $6,624.5 billion. U.S. official reserve assets increased $16.5 billion to $293.7 billion and U.S. government assets other than official reserve assets increased $529.6 billion to $624.1 billion. The stock of U.S. direct investment abroad at current cost increased $247.3 billion to $3,698.8 billion (see box). U.S. holdings of foreign securities decreased $2,590.8 billion to $4,244.3 billion, mainly due to a decrease in the value of U.S. holdings of foreign stocks. Claims on foreigners reported by U.S. banks decreased $410.8 billion to $3,410.8 billion. Claims on foreigners reported by U.S. nonbanks decreased $247.8 billion to $991.9 billion. Foreign-owned assets in the United States increased $2,938.6 billion to $23,357.4 billion. U.S. holdings of financial derivatives as liabilities (with negative gross value) increased $3,977.1 billion to $6,465.0 billion. Foreign official assets in the United States increased $467.4 billion to $3,871.4 billion. Foreign private holdings of Treasury securities increased $245.3 billion to $885.0 billion. The stock of foreign direct investment in the United States at current cost increased $196.7 billion to $2,646.8 billion (see box below). Foreign private holdings of U.S. securities other than U.S. Treasury securities decreased $1,486.5 billion to $4,703.5 billion, mainly due to declines in the prices of foreign-held U.S. stocks. Liabilities to private foreign residents reported by U.S. banks decreased $363.2 billion to $3,611.4 billion. Liabilities to private foreign residents reported by U.S. nonbanks decreased $127.2 billion to $873.2 billion. _______________________________________________________________________________ Valuation Methods for Direct Investment Direct investment at current cost is BEA's featured measure of direct investment in current-period prices. The current-cost method values the U.S. and foreign parents' share of their affiliates' investment in plant and equipment using the current cost of capital equipment, in land using general price indexes, and in inventories using estimates of their replacement cost. Direct investment at market value is an alternative measure of direct investment in current-period prices. The market-value method values the owners' equity component of the direct investment position using indexes of stock market prices. The historical-cost method values assets and liabilities at their book value. Country and industry detail can be shown only under this method. Data on this basis are not presented in this release. _______________________________________________________________________________ * * * Revisions The previously published U.S. net international investment position at yearend 2007 was -$2,441.8 billion. The revised position estimates reflect the incorporation of results from the U.S. Treasury Department’s annual survey of securities claims for December 2007 and annual survey of securities liabilities for June 2008. In addition to the inclusion of survey and improved source data, estimates were revised to incorporate newly available or revised quarterly source data. Revisions attributable to these updated source data were for 2006-2007. Revisions to the U.S. net international investment position from all sources were $41.5 billion for 2006 and $301.9 billion for 2007. A more detailed discussion of the U.S. net international investment position at yearend 2008 and revised historical data will appear in the July issue of the Survey of Current Business. That issue will also contain an article about historical-cost direct investment positions, with detail by country and industry, and revised direct investment historical data. * * * BEA’s national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA’s Web site at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.