Net receipts of funds from transactions involving changes in United States investments abroad aggregated $271,000,000 in 1937 compared with $177,000,000 in 1936 (see table 34). Transactions involving changes in foreign long-term investments in the United States resulted in net receipts of only $251,000,000 in 1937 compared with $596,000,000 the previous year (see fig. 16). As in 1936, the net effect of these movements was a tendency to decrease United States investments abroad, on the one hand, and to increase foreign investments in the United States on the other.

CHANGES IN UNITED STATES LONG-TERM INVESTMENTS IN FOREIGN COUNTRIES

During 1937 transactions affecting United States long-term investments in foreign countries resulted in net receipts of $271,000,000, as compared with similar receipts of $177,000,000 in 1936. The gross receipts from transactions tending to reduce investments in foreign countries increased very considerably to $903,000,000, owing chiefly to an $86,000,000 rise in foreign securities resold to foreigners (see table 34). Bond-redemption and sinking-fund operations were slightly higher during 1937. The principal factor of change was the extensive program of bond redemption and refunding carried out by the Argentine Government. In the course of these operations Argentina retired more than $225,000,000 of dollar bonds which had been previously sold in the United States.

Gross payments for new United States investments in foreign countries in 1937 were $632,000,000. Foreign securities purchased from foreigners through the security markets accounted for $602,000,000 of this total. New direct investments and privately taken foreign issues amounted to only $20,000,000, while new public offerings of foreign issues amounted, after deduction for refunding, commissions, and discounts, to only $10,000,000.90

Public offerings of foreign issues in 1937, at $158,000,000, as shown in table 35, were somewhat higher than during the previous year. As during 1936, they were all refunding loans, at least in part, and were for Argentina, Canada, and Norway. There were no foreign corporate issues during 1937.

Among the transactions affecting United States direct investments abroad, the largest were sales to foreigners of the foreign subsidiaries of American corporations. Such transactions affected the investments in Canada, Mexico, and England in particular. Some of the preferred stock and bond issues of the foreign subsidiaries of United States companies were retired out of the cash resources of the subsidiaries. Such transactions enter into the balance of payments, but the increases of direct investments through the reinvestment of earnings do not involve any international transfers of funds and accordingly affect the investment totals only.91

90 See note and footnote to table 35.

91 See section, "Interest and Dividends: Income from Direct Investments."

Table 35.-Foreign Capital Issues Publicly Offered in the United States, 1937

1 These figures do not represent the actual amounts involved in refunding bonds held by Americans. After adjustments were made for previous purchases by investors in foreign countries and purchases from foreigners by investors in the United States, refunding was estimated at $134,000,000, as shown in table 34, as against a total of $148,700,000 shown above. These adjustments are not identified by issues because the possibilities of error are greater in the details than in the aggregate figure.

2 American statistics relating to foreign capital issues usually include offerings of all territories and possessions. Inasmuch as Alaska, Hawaii, and Puerto Rico are parts of our customs and, therefore, balance-ofpayments area, their issues are not included in the balance-of-payments estimates.

NOTE. This schedule of capital issues was prepared in conformity with the practice of previous years: That is, the outstanding "American share" of the issue to be refunded was carried as "refunding to Americans" (see footnote 1, table 22). The excess of bonds refunded over the purchases of the new bonds, in some instances, causes it to appear as if the foreign loan resulted in a net inflow of capital. Usually in such cases some of the refunded bonds had been repurchased by foreigners prior to the issuance of the new loan, so that at least part of the capital inflow took place in earlier years.

CHANGES IN FOREIGN LONG-TERM INVESTMENTS IN THE UNITED STATES

Almost three-fourths of the long-term investment turnover in 1937 involved changes in foreign investments in the United States. Transactions tending to increase foreign investments in the United States amounted in 1937 to $2,280,000,000, while those tending to reduce the total foreign investments amounted to $2,029,000,000. However, less than half of the net receipts of funds, or $251,000,000, was connected with such transactions. These facts are illustrative of the character of much of the recent foreign investment in United States securities; that is, there was a large volume of in-and-out trading. It does not necessarily follow that the funds were invested in this country on a temporary basis, although world conditions have been such as to suggest investments of that type. Direct investment transactions and bond-redemption and sinking-fund operations were a negligible part of the total.

Approximately 40 percent of the gross foreign purchases and sales of domestic securities took place during the first quarter, while security

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prices were rising. Two-thirds of the net purchases were made during that quarter. Subsequent developments constituted a natural deterrent to share investment, with the result that there was some net foreign selling of domestic securities during the latter part of April and the early part of May and again for a few weeks after mid-September; but for the most part foreigners continued to acquire American securities in moderate amounts. In fact, with the exception of the second quarter, when foreigners sold United States securities on balance, the ratio of purchases to sales changed only slightly-from 1-0.83 in the first quarter to 1-0.91 in the fourth quarter.

The United Kingdom was first in both gross transactions and net purchases. Canada was second in gross dealings, but the net purchases were insignificant. Switzerland and the Netherlands follow in gross and net transactions, and France dealt in fairly large volume but with purchases and sales in near balance.

Figure 17.-Movements of short-term banking funds between the United States and foreign countries, 1930-37.

CHANGES IN INTERNATIONAL BANKING ACCOUNTS

The international movement of foreign short-term banking funds, as reflected in the balance of payments of the United States in 1937, clearly illustrates the volatile character of such funds. During the first quarter there was a steady flow to this country of foreign funds, which totaled $191,000,000. Practically all of this increase in liabilities to foreigners was the result of the accumulation of balances in connection with the Argentine program of reducing its dollar debt. During the second quarter persistent rumors abroad of a possible decrease in the dollar price for gold were accompanied by substantial dishoarding of gold in London and by the transfer of much of the proceeds to the United States. The total inflow of foreign fundsthat is, the increase in the foreign liabilities of American banksduring that quarter was $489,000,000, an amount which exceeded the

year's increase (see table 36 and fig. 17). Switzerland, the United Kingdom, and the Netherlands accounted for more than 90 percent of the increase.

Table 36.-International Banking Accounts of the United States, 1932-37 [In millions of dollars]

Two sets of data are carried as of Jan. 2, 1935. The first column represents an adjustment of the second column for appropriate comparison with the data for earlier years, when the number of institutions reporting was still far from complete. The second set of figures for Jan. 2, 1935, and the data reported for Dec. 31, 1935, and subsequent dates represent comparable returns from practically all banking institutions holding short-term international assets and liabilities. The adjustment took account also of the fact that, beginning in 1935, the figures include brokers' credit and debit balances.

Developments during the third quarter were varied. Because of European tension, particularly early in September, over the situation in the Mediterranean, there was a substantial increase in European balances in the United States. On the other hand, the progress of the Argentine bond redemptions entailed substantial reductions in the accounts which had been built up during the first quarter. However, the foreign liabilities of American banks increased somewhat through September 29, at which time they stood at $2,305,000,000— the highest total since England's suspension of gold payments in 1931. Central bank balances, as reported by the Federal Reserve banks, which were just over $200,000,000 at the end of June, rose, by the end of September, to slightly more than $400,000,000, accounting for practically all of the net increase during the quarter.

Somewhat greater optimism regarding the political and economic situation in France stimulated the repatriation of French foreign balances during the fourth quarter. More important influences which accounted for the reduction of foreign dollar balances, however, were (1) the rumors circulating in Europe that the United States might raise the price of gold, (2) the large excess of United States exports over imports, and (3) the rapid decline in security prices in this market. The latter affected primarily the brokerage balances. Combined with the further reduction of Latin American (Argentine) balances, these influences caused a drop of $575,000,000 in the foreign liabilities of American banks. It constituted one of the heaviest withdrawals of short-term funds from the United States ever experienced in so

short a period, and was the first heavy withdrawal since the banking crisis of February-March 1933.

Changes in the volume of the short-term foreign assets of United States banks were neither so large nor so spectacular. For the year 1937 as a whole they decreased from $673,000,000 to $655,000,000. Declines were recorded during the second and third and increases during the first and fourth quarters. Short-term assets in Germany declined during all periods of the year and were connected to a considerable degree with the reduction of the Standstill credits. Substantial withdrawals from the United Kingdom and Latin America took place throughout the first 9 months of 1937. For the year as a whole there was a fairly large increase in banking assets in Canada, while during the last quarter they increased in all areas except Germany. The net increase of American short-term banking assets

Figure 18.-International banking accounts of the United States, 1929-37.

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abroad from October to December, inclusive, amounted to $69,000,000 and added materially to the outflow of foreign funds.

Brokers' foreign credit and debit balances are included in the amounts "due to" and "due from foreigners," respectively, in table 37 (see also fig. 18). Credit balances at the end of 1937 amounted to $36,000,000 and debit balances to $66,000,000. The net movement of such balances in 1937-an inflow of $35,000,000-was the result of the reduction of debit balances to foreign accounts. It reflected the diminished dollar volume of trading and probably the closing of some accounts during the last half of the year.

For the year as a whole there was a net inflow of short-term banking funds of $290,000,000. Of this total, $236,000,000 represented an increase in foreign liabilities and $54,000,000 a decrease in foreign assets (see table 36 and fig. 17). The increase in foreign liabilities was greater, on an absolute and a percentage basis, in short-term loans and investments than in deposits. Among the foreign assets short