Africa, Asia, and Oceania.-American investments in manufacturing enterprises in Australia and Japan and copper mining in Africa were somewhat more profitable in 1933 than in 1932. The investments in public-utility enterprises showed reduced earnings, while the rubber plantations of the East Indies, Malaysia, and the Philippines, and other miscellaneous enterprises showed but little change from the unprofitable state prevailing in 1932. On the whole, it is estimated that earnings amounted to $15,000,000 to $25,000,000 and transfers to $10,000,000 to $20,000,000.

FUNDING OF BLOCKED ACCOUNTS

In addition to the foregoing, Argentina and Brazil agreed during the year with American holders of blocked accounts to fund these accounts into bonds of the national governments. Prior to these agreements Uruguay had by unilateral arrangement extended similar privileges to American holders of blocked accounts in that country.

Part of these blocked accounts arose out of the earnings of our direct investments, while the greater part of the balance originated in commercial accounts.11 In effect, the funding of these blocked accounts represented the reinvestment on a long-term basis of shortterm funds.

Similar in principle are the arrangements for paying in funding bonds all or part of the interest due on certain foreign bonds. Such arrangements have been made by Brazil, Bulgaria, Colombia, Costa Rica, Guatemala, Panama, and Yugoslavia. Bonds in the amount of about $14,000,000 were received during 1933 as a result. Such transactions do not, of course, have an immediate effect on the balance of payments of the United States, since they represent the immediate reinvestment of interest, without the necessity of cash transfers. For convenience, the funding of blocked accounts and interest payments were bulked and the earnings account was credited while the long-term capital account was debited (privately taken foreign issues).

In addition to the transactions already referred to miscellaneous items of about $3,000,000 may be viewed as falling in this category. Allowing for the funding of commercial funds, which are accounted for elsewhere in the balance of payments, an amount of $27,000,000 is entered as interest and earnings received and offset in the capital items as new long-term investments abroad.

EARNINGS ON AMERICAN SHORT-TERM INVESTMENTS ABROAD

Earnings on short-term balances and investments held abroad in 1933 by American banks are estimated at $43,000,000. As shown in table 15, these short-term holdings stood at slightly more than $1,000,000,000, at the end of 1932 and again at the end of 1933. During part of the year they had stood at considerably less than $1,000,000,000, with the result that the year's average was probably about $975,000,000. Rates varied widely, ranging from possibly 1 percent in several foreign countries to at least 54 percent in the case of certain short-term loans outstanding in central Europe. From an examination of available rates it was estimated that the weighted average applicable to the total short-term holdings was about 4% percent. The item is therefore estimated at $43,000,000.

11 See Miscellaneous Credits, in section on Short-Term Capital Movements.

RECEIPTS ON STOCK TRANSFER TAXES, BROKERAGE FEES, AND COMMISSIONS

The aggregate receipts from foreigners from stock transfer taxes in 1933, together with commissions of fiscal agents, brokerage fees, etc., collected from foreigners, are estimated at $10,000,000, as compared with $5,000,000 in 1932. The increase was due largely to higher average stock transfer taxes and an increase in the recorded volume of international security trading.

PAYMENTS TO FOREIGNERS ON LONG-TERM INVESTMENTS IN THE UNITED STATES

No important estimate entering into the United States balance of international payments rests on such a paucity of reliable data as that of yields on foreign-held long-term investments in the United States. No census has ever been taken of such investments. For reasons outlined in each of the two preceding issues of this bulletin,12 an estimate of $2,250,000,000 was employed in 1931 and an average rate of 42 percent was applied. An estimated yield of $100,000,000 in 1931 was reduced to $60,000,000 in 1932 because of the omission or reduction of dividend rates on a large number of American shares, particularly rail stocks, which had been considered favorites among European investors, as well as a drop in yields on direct investments, real-estate holdings, etc. In some cases this situation has improved during 1933. The marked activity in American shares, featured by the net foreign sale of railroad stocks (see section on International Securities Movement), and the net foreign buying of utility and industrial shares hardly accounted for any appreciable gains in net dividend payments to foreigners for the year as a whole. It is probable that on various other classes of investments the rate of return declined further in 1933. The estimate of $60,000,000, entered in 1932, is therefore left unchanged in 1933.

PAYMENTS TO FOREIGNERS ON SHORT-TERM INVESTMENTS IN THE UNITED STATES

Estimated payments on foreign-owned dollar bank balances and short-term investments are placed at $3,000,000, the lowest estimate in recent years. As shown in table 15, short-term banking assets held in the United States by foreign banks fell from $870,000,000 at the end of 1932 to $487,000,000 at the end of 1933. The greater part was held on deposit, the returns on which averaged hardly more than one-half of 1 percent during the first half of the year, while after the passage of the Glass-Steagall bill, approved June 16, 1933, interest payments on demand deposits were prohibited. A very small part of the total deposits were time deposits on which interest payments were permitted. Miscellaneous short-term investments of foreign banks averaged about $125,000,000 during the year, and the average rate of return on these was probably less than 1 percent.

UNITED STATES GOVERNMENT INTERNATIONAL ACCOUNT

The international account of the United States Government consists of two parts: (1) Receipts from foreign governments on so-called "war-debt account" and (2) miscellaneous Government items, such as

12 The Balance of International Payments of the United States in 1931 (Trade Information Bulletin No.803), pp. 48-49; The Balance of International Payments of the United States in 1932 (Trade Information Bulletin No. 814), pp. 67-68.

receipts of Panama Canal tolls, receipts from the German Government on account of the awards of the Mixed Claims Commission, consular fees collected, etc., and expenditures abroad by the various executive departments, payments by the War Claims Arbiter, Alien Property Custodian, etc.

(See

Receipts on war-debt account aggregated $20,337,626.82. table 12.) Of this total, $11,367,412.18 represented receipts of 22,734,824.35 ounces of silver at 50 cents an ounce, in accordance with authority granted the President by section 45 of title III of the Agricultural Adjustment Act, approved May 12, 1933. Authorization was for a period of 6 months from the date of enactment, but the aggregate value of silver so accepted was not to exceed $200,000,000. The President announced that on accounts due June 15, 1933, he would accept such payments in silver at a price not to exceed 50 cents an ounce, as provided in the act. The Governments of Great Britain, Czechoslovakia, Finland, Italy, Lithuania, and Rumania took advantage of the offer and made payments as follows, according to the Annual Report of the Secretary for the fiscal year ended June 30, 1933:

Table 12.-UNITED STATES GOVERNMENT RECEIPTS IN 1933 ON WAR-DEBT

1 Includes receipts of 22,734,824.35 ounces of silver accepted at value of $11,367,412.18.

On January 30, 1934, the Secretary of the Treasury transmitted to the United States Senate a statement relative to the indebtedness of foreign governments to the United States as of January 4, 1934, giving the amounts not paid according to contract terms. This statement is shown in table 13.

TABLE 13.-STATEMENT RELATIVE TO INDEBTEDNESS OF FOREIGN GOVERNMENTS TO THE UNITED STATES AS OF JAN. 4, 1934

$8,726,645.63

165, 283, 195. 35 4, 636, 157, 358. 30 32, 583, 338.65 2, 008, 103, 288. 76

7,312, 658. 38 6, 554, 544, 23 63, 871, 783. 49

$2,852, 898. 61 176, 120, 246. 63 1, 379, 690. 83 13, 687, 010. 12

286, 462. 10 221, 169. 92 1,048, 750. 08

$2,670, 085.83

32, 000, 000. 00 $134,399,481.58
694,000.00

12, 300, 000. 00

$182,812. 78

9, 720, 765. 05

605, 384. 00

80, 306.83

490, 854. 24

896, 155.88

223, 687.84

15, 274, 26

167, 781. 66

13, 683. 26

1, 000, 000. 00

47,500.00
39,705.00

48,750. 08

6, 919, 866, 167. 16 195, 596, 228. 29 48, 751, 290. 83 135, 887, 189. 32 10, 957, 748. 14

23, 757, 934. 13 411, 166, 529. 09 17, 784, 695. 59 3, 960, 772, 238. 30

724, 186, 740. 53

2,051, 938. 61 222, 560, 466. 43 61, 625, 000. 00

5,423,905, 542. 68 108, 559, 354. 14 27,987, 705. 00 76, 144, 288. 15 4, 427, 360.99

12, 352, 498, 355. 47 304, 155, 582. 43 76, 738, 995. 83 212, 031, 477. 47 15, 385, 109. 13

12, 710, 451, 610. 40 662, 108, 837. 36 281, 590, 109. 47 365, 133, 618. 76 15, 385, 109. 13

1 Payments due on account of war loans postponed in accordance with terms of funding agreement. Interest due on such postponed amounts has not been paid. United States has received same proportionate payment on account of amount due on stabilization and refugee loan of 1928 as other creditors, namely, a payment of $65,376, representing 30 percent of the annual interest for 1932. Payments of other amounts due on account of this loan have not been received, but assurances of treatment equal to that arranged for private holders of such bonds have been received.

2 Rumanian Government paid on June 15, 1933, the amount of $29,061.46 as advance interest on the amount of $1,000,000 due on that date. No payment has been received on account of the amount of $48,750.08 due on Jan. 2, 1934, under the moratorium agreement with that Government, but discussions regarding this payment have not been closed.

3 Amount due (4,027,611.95 reichsmarks) paid on Sept. 30, 1933, to the conversion office for German foreign debts in Berlin in a "blocked account" for the Federal Reserve Bank of New York, to the credit of the general account of the Treasurer of the United States. Refunding agreement provides for payment in dollars at Federal Reserve Bank of New York.

Hungarian treasury certificates in the pengo equivalent of the dollar amount due have been deposited to the foreign creditors' account at the Hungarian National Bank. Refunding agreement provides for payment in dollars at the Treasury of the United States in Washington or at the Federal Reserve Bank of New York. No payments received since June 15, 1931.

In addition to the receipts on war-debt account the United States Government's international account showed miscellaneous receipts of approximately $32,000,000 and payments abroad of roughly $85,000,000. The major part of these items represented transactions of the various executive departments. Other items include receipts on German Mixed Claims and Army of Occupation costs, and payments by the War Claims Arbiter and Alien Property Custodian.

Receipts of $54,764.31 from Germany on Army of Occupation costs represented the interest on amounts due during the fiscal year_but postponed under the debt-funding agreement of June 23, 1930. Payments from Germany on mixed claims due during the fiscal year were postponed under the same agreement, and the receipts of $365,000 represented interest payments on the amount postponed.

A detailed itemization of the Government's international accounts during 1932 and 1933 is shown in appendix H.

MISCELLANEOUS SERVICES

In addition to the various classes of service transactions already discussed, there are certain minor, though not negligible, transactions which fall within the balance of international payments. Among these are international transfers of funds by insurance companies, transfers involved in international advertising, motion-picture royalties received abroad by American producers, receipts and remittances by communications companies engaged in international services, and international sales and purchases of electric power along the Canadian border.

Of these miscellaneous items the funds involved in international insurance transactions are probably the largest. On the basis of available data it is entirely impossible to determine whether receipts of American companies exceed or fall below their payments abroad. Approximately 50 percent of the total premium income, exclusive of life premiums, of British insurance companies is normally collected in the United States. In 1932, the last year for which figures are available, the premium income (excluding life-insurance premiums) was reported at 106,901,260 pounds sterling. 13 At par of exchange, receipts by British companies in 1932, therefore, aggregated approximately $260,000,000. In addition, substantial_premium payments are made to foreign life-insurance companies. Payments by American companies to foreign policyholders and beneficiaries add further to this total.

It is probable, however, that most, if not all, of the payments to foreign companies or individuals are offset by corresponding receipts from abroad of American insurance companies and by receipts of American policyholders and beneficiaries. Furthermore, the transfer and use of insurance funds are covered to a substantial degree in other international transactions, such as international security transfers, remittances, and interest returns on investments. In fact, it is because of the many different classes of international transactions in which insurance funds become involved that any estimate of the respective receipts and payments would be purely the roughest guess. It is unlikely that adequate data would show a large net item, either credit or debit; therefore no entry is made.

13 London Economist, Dec. 2, 1933, p. 1075.