ECONOMIC

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TABLE 52.—U.S. balances on international transactions, 1972—73[Billions of dollars, seasonally adjusted]Type of transactionFirst 3 quarters197219731972IV11973IIIIIGoodsi-5.2-0.5-1.7-1.0-0.20.7ServicesMilitary transactionsInvestment income 2 . ..OtherGOODS AND SERVICES1.4-2.75.6-1.5-3.73.5-2.16.7-1 13.0.9g2. 2_ 5g1.1-.82.3- 4.2.9-.72.1 5.71.4-.62.3-.32.1Unilateral transfers, net 3-2.9-2.7-.7-1.0-.9CURRENT ACCOUNT-6.6.3-1 8- 6-.41.2Long-term capital. ..-1.7.7.2-.4-.21.3U.S. Government 4Direct investment. _. ..Other private ..-.8-2.61.7-.6-1.73.0-.6-.61.4-.3-1.81.7.1-.4.1-.4.51.2CURRENT ACCOUNT AND LONG-TERM CAP-ITALShort-term claims ..-8.3-1.81.0-4.7-1.6-1.2-3.8g-.6-.62.53Short-term liabilities2.3.52.6-1.81.11.2Errors and unrecorded transactions, net .-1.6-4.8-1.5-3.9.4-1.4Allocations of SDR.5.2TOTALS-8.9-8.1-1.5-10.5.32.11 Excludes transfers under military grants.2 Includes direct investment fees and royalties.3 Excludes military grants of goods and services.* Excludes official reserve transactions and includes transactions in some short-term U.S. Government assets.'Equals official reserve transactions balance.Note.—Detail may not add to totals because of rounding.Sources: Department of Commerce, Bureau of Economic Analysis, and Department of the Treasury.Another commonly used measure of the U.S. balance of payments is thecurrent account and long-term capital balance, or the "basic" balance,as it is sometimes called. This balance is computed by adding up all therecorded transactions in the current and the long-term capital accounts,including unilateral transfers. It attempts to measure the extent to whichthe "long-term" or "underlying" demand for foreign exchange has exceededthe "long-term" or "underlying" supply of foreign exchange duringa given period. If all such transactions were accurately recorded, this balancewould also equal the changes in official reserves and the changes in shorttermforeign assets of private banks, corporations, and individuals, net ofchanges in liabilities. Because some transactions may not be measured correctly,however, or may escape measurement altogether, a difference usuallyexists between recorded basic transactions above the line and recordedchanges in reserves and short-term assets below the line. This difference appearsas an errors-and-omissions item in the balance of payments statistics.Deficits and surpluses in the basic balance need not necessarily imply anydisequilibrium which requires corrective action by the government. To theextent that changes in net private holdings of short-term foreign assets are194
voluntary, the existence of a surplus or deficit need not imply that it iseither undesirable or unsustainable. When such changes are quite large inany one year, however, there is a strong possibility that the change is a temporaryresponse to unusual circumstances, such as differences in interestrates. In these cases, some governments might be inclined to intervene tomoderate the exchange rate fluctuations which could result from largeshifts in short-term foreign assets.The U.S. basic balance was in deficit by $1 billion during the first and$5/2 billion during the second quarter of 1973, while during the third quarterit was in surplus by about $2 J /2 billion. For the 3 quarters, the U.S. basic balancewas in surplus by about $1 billion. In other words, Americans in thefirst 3 quarters of 1973 earned $1 billion more from current account and longtermcapital transactions than they spent on similar transactions.Table 52 also shows that during the first 3 quarters $5 billion in net foreigncurrency expenditures were not recorded, while recorded short-termprivate claims on foreigners increased by $4*/2 billion. These two items were"financed" by the $1 billion current account surplus; a $5/2 billion netincrease in recorded short-term liabilities to private banks, corporations andindividuals; and an $8 billion net increase in U.S. liabilities to foreign officialinstitutions.The Net Foreign Asset PositionAt the end of 1972 the estimated value of American assets abroad was$200 billion, and the value of American liabilities to foreigners was $150billion. The $50 billion difference between the two is the estimated netAmerican investment position abroad. The net investment position declinedby about $20 billion from 1970 to 1972, but data for the first 3 quarters of1973 suggest that it probably increased last year.Changes in the U.S. net asset position are brought about in part by surplusesor deficits in the balance on current account, a balance which includesU.S. transactions in goods and services, as well as unilateral transfers(Table 52). The largest changes occurred in the balance on goods andservices. When the United States has a deficit in its trade balance as in 1971and 1972, it imports more than it pays for with exports, thus increasingAmerican liabilities to foreigners. With a trade surplus, as in the first 3quarters of 1973, the United States acquires imports and an increase in netassets abroad in return for its exports. One would therefore expect animprovement of the U.S. net asset position during 1973.The U.S. net asset position is also affected by several kinds of transactionsand accounting adjustments that do not appear in the balance of payments.When foreign subsidiaries reinvest their earnings, this increases the value ofU.S. assets abroad; and when foreign-ow 7 ned subsidiaries in the UnitedStates reinvest their earnings, this increases U.S. liabilities to foreigners.During 1973, U.S. reinvestment of earnings may have exceeded foreignreinvestment by $4 billion or more, thus adding to the U.S. net asset position.Changes in the valuation of outstanding assets and liabilities, which195
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ECONOMICTRANSMITTEDTO THE CONGRESSF
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CONTENTSPageECONOMIC REPORT OF THE
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ECONOMIC REPORT OF THE PRESIDENTTo
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of the inflation rate of 1973, and
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or permit incentives—including hi
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people of an easy time. Like our pa
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THE PRESIDENT:LETTER OF TRANSMITTAL
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CHAPTER 3. INFLATION CONTROL UNDER
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Page7. Unemployment Rates by Sex an
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Page53. Maximum Percent Change in E
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We have specific problems, too, asi
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This curtailment of supply does, of
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consumption we would not have chose
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outside the food and fuel sectors a
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about $14 billion from deficit to s
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8 percent, at annual rates. Continu
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A third method, which seems to have
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DEVELOPMENT OF LOW-COST ENERGY FOR
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would otherwise have been invested
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TRANSPORTATION REFORMLast year the
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constraints. Restrictions on entry
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In early 1974 the Commerce Departme
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Consumer SpendingConsumer expenditu
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Chart 1Changes in GNP, Real GNP, GN
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During the fourth quarter the downt
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A number of points may be noted abo
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income do not appear to have played
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Chart 2Changes in Real GNPPERCENTUN
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of essentially declining participat
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The unemployment rate for adult mal
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from job losers, the remainder of t
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to maintain a somewhat larger work
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Chart 3Changes in Selected Price Me
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TABLE 12.—Changes in selected pri
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production workers, and it is sensi
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the profits that companies report a
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Two measures of changes in income t
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About $8 billion of the growth in e
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effect of covered wage and employme
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Since these apparent stabilization
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MONETARY POLICY AND FINANCIAL MARKE
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lation requiring ceilings on all CD
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TABLE 19.—Offerings of new securi
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CHAPTER 3Inflation Control Under th
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(A more detailed presentation of th
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ate of advance in grocery store foo
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to the economy but also in the sens
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were imposed, limiting prices to th
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spurring of domestic inflation by e
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was more than twice as high in 1973
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wage increases in many cases, const
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TABLE 26.—Behavior of items in co
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Chart 6Changes in RelatedWholesale
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and natural gas. A complex set of f
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CHAPTER 4Energy and AgricultureFOR
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al gas have contributed to the low
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TABLE 30*—Wholesale prices, all i
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tion sector, which in 1972 accounte
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United States on oil imports, OPEC
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of old oil and prices of imported a
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LONG-TERM PROSPECTSThe price of imp
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important that the higher costs be
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improving the environment. The fund
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pollutants into the atmosphere will
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of research and rapid mechanization
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lion in fiscal 1972. Actually the a
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a minimum income. Unless prices fal
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The Administration supports the exa
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and estimates of some of these effe
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Since families typically pool their
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ability were not perfectly correlat
Page 150 and 151: Farm wages and farm income received
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Page 154 and 155: Chart 9Real Incomes for Men in Diff
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Page 158 and 159: whose owners or white workers have
Page 160 and 161: Several factors can be mentioned to
Page 162 and 163: y social pressures, however, which
Page 164 and 165: TABLE 42.—Relation of wage and sa
Page 166 and 167: ferences in their mix of occupation
Page 168 and 169: for public housing may be valued by
Page 170 and 171: 8 to 20 percent for black females.
Page 172 and 173: sufficiently high to cover the addi
Page 174 and 175: TABLE 45.—Federal Government tran
Page 176 and 177: given to the problems of poverty du
Page 178 and 179: TABLE 47.—Trends in the employmen
Page 180 and 181: enefit increases greater than the i
Page 182 and 183: (Table 45). Medicare is chiefly des
Page 184 and 185: Public assistance is specifically d
Page 186 and 187: Then, subtracting equation (4) from
Page 188 and 189: policies, and the tensions among co
Page 190 and 191: In the fourth quarter the dollar ro
Page 192 and 193: which include trade, grants and oth
Page 194 and 195: tarily by foreign central banks, ev
Page 196 and 197: ply of oil, and by domestic price c
Page 198 and 199: in the United States. In view of th
Page 202 and 203: esult from changes in market value
Page 204 and 205: TABLE 54.—Major changes in capita
Page 206 and 207: attempt was made to agree on a code
Page 208 and 209: The official price of gold was rais
Page 210 and 211: system, these demand changes were a
Page 212 and 213: What Pressures Should Be Exerted on
Page 214 and 215: The composition of reserves among d
Page 216 and 217: prices of approximately the same or
Page 218 and 219: tained, they would probably be felt
Page 220 and 221: Reducing Nontariff BarriersIn order
Page 222 and 223: Structural problems. Agreements on
Page 224 and 225: arrangements which are designed to
Page 226 and 227: capital and the means of putting th
Page 228 and 229: Canada and four smaller countries u
Page 230 and 231: currencies have appreciated relativ
Page 232 and 233: Effective Changes in Other Currenci
Page 235 and 236: Activities of the Advisory Committe
Page 237: Appendix BREPORT TO THE PRESIDENT O
Page 241 and 242: Report to the President on the Acti
Page 243 and 244: govern the exploitation of the reso
Page 245 and 246: Manpower and Social Affairs Committ
Page 247 and 248: Junior Staff EconomistsJames S. Fac
Page 249: Appendix CSTATISTICAL TABLES RELATI
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PRODUCTION AND BUSINESS ACTIVITY:Pa
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NATIONAL INCOME OR EXPENDITURETABLE
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TABLE C-2.—Gross national product
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TABLE C-3.—Implicit price deflato
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TABLE C—8.—Gross national produ
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TABLE C-10.—Gross national produc
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TABLE C-12.—Personal consumption
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TABLE C-14.—Relation of gross nat
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TABLE C—16.—Relation of nationa
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TABLE C-18.— Total and per capita
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TABLE C-19.—Sources of personal i
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TABLE C-21.—Saving by individuals
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POPULATION, EMPLOYMENT, WAGES, ANDP
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TABLE C-24.—Noninstitutional popu
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TABLE C-26.— Selected unemploymen
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TABLE C—28.—Unemployment insura
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TABLE C-29.—Wage and salary worke
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TABLE C-31.—.•Average weekly ea
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TABLE C-33.—Changes in output per
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TABLE C—35.—Industrial producti
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TABLE C-37.—Capacity utilization
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TABLE C—38.—New construction ac
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TABLE C-39.—New housing starts an
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TABLE C-41.—Sales and inventories
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TABLE C-43.—Manvjacturers* new an
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TABLE O45.—Consumer price indexes
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TABLE C—47.—Consumer price inde
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TABLE C~49.—Wholesale price index
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TABLE C-50.—Wholesale price index
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194819491950.,1951195219531954Yearo
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TABLE C-53.—Commercial bank loans
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TABLE G-54.—Total funds raised in
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TABLE C-56.—Federal Reserve Bank
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TABLE C-58.—Bond yields and inter
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TABLE C-59.—Short- and intermedia
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TABLE C-61.—Mortgage debt outstan
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TABLE C-63.—Net public and privat
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TABLE C-65.—Federal budget receip
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TABLE C-66.—Relation of the Feder
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TABLE C-68.—Receipts and expendit
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TABLE C-10.—State and local gover
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TABLE C-72.—Estimated ownership o
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CORPORATE PROFITS AND FINANCETABLE
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TABLE C-76.—Relation of profits a
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TABLE C-77.—Sources and uses of f
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TABLE C-79.—State and municipal a
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TABLE C-81.—Business formation an
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Year1929...1933...1939...1940...194
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TABLE C-85.—Indexes of prices rec
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TABLE G-87.—Comparative balance s
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TABLE G-88.— U.S. balance of paym
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TABLE C-90.— U.S. merchandise exp
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TABLE C-92.—International reserve
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TABLE G-94.—International investm
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TABLE C-96.—Consumer price indexe
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ECONOMIC

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