As Buffett points out in his article (posted together with this Assignment on Canvas), the value of U.S. assets owned by foreigners exceeds the value of foreign assets owned by U.S. residents. In BoP terminology, the U.S. has a negative Net Investment Position (NIP). Buffett is concerned that over time the U.S. will have to pay more and more to foreign owners of U.S. assets. The Balance of Payments (Current account: Income [see slides from Session 1]) actually tracks the interest and dividends payment the U.S. makes as well as those U.S. residents receive. So, lets find out how bad things are.

a. Go to the BEA website and download the latest report (available after March 27, 2019) on the U.S. balance of payments: www.bea.gov Data: by Topic International Trade & Investment International Transactions (Balance of Payments) News Release: International Transactions Current Release: Full Release and Tables. Note that credits and debits are entered as positive numbers (see, for example, exports and imports).

b. Go to Table 1 and find (in the Current Account) Primary income receipts. How much did the U.S. receive in terms of investment income during 2018(income from foreign assets owned by U.S. residents)? From which type of investment is most of the income coming from?

c. Now look for Primary income payments. How much did the U.S. pay to foreigners that had U.S. investments (i.e., owned U.S. assetsowned) during 2018? Also, calculate the net income from assets that the U.S. either paid or received in 2018?

d. What do you learn from b. and c.? What might explain the difference between the NIP and the net asset income of the U.S.? Does the evidence weaken or strengthen Buffetts arguments?