E C O N O M I C R E P O R T O F T H E P R E S I D E N T

ership claims cross borders. For example, a U.S. mutual fund might turn overits entire portfolio of foreign securities more than once during the course ofa year. Official balance of payments data provide an alternative measure ofgross flows that comes closer to measuring the true change in cross-borderownership claims. Chart 6-4 shows these data on inflows of capital sent intothe United States by foreigners, and outflows of capital sent from the UnitedStates by U.S. residents. U.S. outflows abroad have been rising; foreigninflows into the United States have been rising even faster. These flows typicallyamounted to 1 percent or less of GNP through the 1960s. By contrast,flows have been much larger recently: from 1995 through 1998, for example,inflows averaged 7 percent of GNP.Net capital flows (the difference between inflows and outflows in Chart6-4), measured relative to GNP, have also reached much higher levels inrecent decades. Indeed, the United States is by far the largest recipient of netcapital inflows in the world, amounting to more than $200 billion in 1998.The large net capital inflows of the past two decades have led to a profoundchange in the net international indebtedness position of the United States.The United States was a net debtor until the late 1910s and then a net creditoruntil the late 1980s. At the end of 1998, foreign-owned assets in the UnitedStates exceeded U.S.-owned assets abroad by about $1.2 trillion (valued atcurrent cost), an amount equal to 14 percent of U.S. GNP. A century ago, thenet international investment position of the United States was similar, with206 | Economic Report of the President