This item consists of security transactions, as reported by the Treasury Department (see footnote 88), and certain direct investment transactions. This item consists of movements of short-term banking funds and changes in brokers' credit and debit balances, as reported by the Treasury Department. An export of paper currency is equivalent to the sale to foreigners of non-interest-bearing obligations and thus represents, in effect, an inflow of capital. This item has been carried before 1935 in the same general balance-of-payments category as gold. The net inflow of capital funds into the United States during 1937 amounted to $817,000,000, as compared with $1,187,000,000 during 1936 and $1,537,000,000 during 1935. This declining inflow of capital was brought about through varied channels. In 1936 the increase in the inflow of long-term capital was exceeded by the decrease in the inflow of short-term capital, both banking and miscellaneous, resulting in a lower total movement. In 1937, however, the inflow of longterm as well as short-term funds declined. The net capital movements between the United States and foreign countries during 1935, 1936, and 1937, as reported by the Treasury Department, are shown by weeks and by classes, in figure 15. Virtually all of the capital transactions, as classified in the balance of international payments, fall within two general groups, namely, (1) movements of short-term banking funds (including changes in brokers' balances) and (2) long-term capital transactions, which include all security transactions as well as estimated international transfers of direct investments. Two other groups, represented by estimated international movements of paper currency, and by the net result of miscellaneous capital transactions (including the international credit operations of governmental lending agencies), are of minor statistical importance. Since December, 1934, the Federal Reserve banks have collected, on behalf of the United States Treasury Department, comprehensive weekly data covering the major types of international capital move ments, and to show as separate items certain types of transactions which have been reported from year to year in the balance of payments. 88 These data were published in Statistics of Capital Movements between the United States and Foreign Countries and of Purchases and Sales of Foreign Exchange in the United States, Reports Nos. 1-6 (United States Treasury Department, Division of Research and Statistics), covering the period from Jan. 1935 to Dec. 1937. The detailed statistics made available in these reports have been conveniently summarized in the Federal Reserve Bulletins for May 1937 and Apr. 1938. In the May 1937 issue, page 396, it was pointed out that changes in brokerage balances are closely related to security transactions, and that it is thus desirable, for some purposes, to consider them as part of the net movement of capital in security transactions. 25 Inflow to U.S. Millions DOLLARS 100 75 50 ments between the United States and foreign countries.88 The statistics of capital movements used herein represent, in the case of shortterm funds, the data published by the Treasury Department and, in the case of long-term capital, except in table 33, Treasury data on security transactions adjusted to include all transfers of direct invest JAN. MAR. MAY JULY SEPT NOV. S. Treasury Department, Division of Research and Figure 15.-Capital movements between the United States and foreign countries, by weeks, 1935-37 (reprinted from Statistics of Capital Moves, 1939etween the United States and Foreign Countries, Report No. 6, السلي 25 JAN 89 The reported 9 net inflow of short-term banking funds during 1937 amounted to $290,000,000, as compared with $404,000,000 in 1936. During the first 9 months of 1937 the volume of the inflow, which was practically continuous except for the month of March, almost equaled that during the full year 1935 when our net debtor position on shortterm account was increased by $970,000,000. The fourth quarter, however, witnessed a large and sustained withdrawal of banking funds, with the result that the year's net movement was relatively small. Net foreign purchases during 1937 of American and foreign securities from United States holders caused a reported net inflow of funds in the amount of $512,000,000, as compared with $792,000,000 in 1936. The weekly data charted in figure 15 form a much more broken line in 1937 than in 1936. Whereas net purchases were the rule, and were in substantial volume, in 1936, weeks of heavy net sales occurred occasionally in the first half of 1937, while the value of weekly net purchases or sales during the last half was considerably reduced. Of the total reported net inflow of funds in security transactions, $245,000,000 was accounted for by net foreign purchases of domestic securities and $267,000,000 by net foreign purchases of foreign securities. The latter represented net purchases for redemption, sinking-fund purposes, repatriation by issuer, and repurchases by foreign investors. Table 33.-Net Movements of Capital in Short-Term Banking Funds and in Security Transactions, by Countries and Areas, 1935-37 1 [In millions of dollars. Plus sign indicates net inflow of funds; minus sign indicates net outflow of funds] Based on Summary Table B, Statistics of Capital Movements between the United States and Foreign Countries, Report No. 6, U. S. Treasury Department, Division of Research and Statistics, 1938 (p. 8). In several instances the original data (shown in thousands of dollars) were rounded in order to assure agreement of total figures with corresponding data in other tables. * The movement of brokerage balances is included. The totals represent the net movements of capital in security transactions as reported by the Treasury Department. The same data, adjusted to take account of the shift of certain miscellaneous capital items into the long-term category and to include transfers of direct investments, are shown in detail in table 34. The word "reported" indicates that the data referred to are based exclusively on Treasury data. Total As indicated in table 33, Switzerland was the most important immediate source of capital funds entering the United States during 1937. Latin America was second in size, followed by the United Kingdom. This was the first year that the inflow from Latin America has been of such relative importance, the cause being the large-scale redemption of Argentine dollar bonds in this country. In 1936 there was a movement of Argentine short-term funds to New York for that purpose. Those funds, together with others provided during 1937, were then used at intervals in the latter year in purchasing the bonds, as is reflected in table 33. There was a reversal from 1936 to 1937 in the importance of the movements of short-term and long-term funds in the case of Switzerland, also. Short-term balances having their re Figure 16.-Long-term capital movements between the United States and foreign countries, 1928-37. ported source in Switzerland rose very rapidly during the second and third quarters of 1937. The withdrawals during the fourth quarter were not sufficient to offset completely the previous increase. LONG-TERM CAPITAL TRANSACTIONS For the seventh consecutive year the international long-term capital transactions of the United States yielded in 1937 a net receipt of funds. The net inflow of $522,000,000 was much below the inflow in 1936, but still was higher than in 1935. The most notable feature of the year's transactions was the continued high level of total receipts and payments which, while slightly below the 1936 level, were far in excess of those of 1935 and any previous year. |