from Follow the Money

Lots of money sloshing around

November 16, 2005

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Net purchases of US long-term securities topped $100 billion in September -- more than enough to finance the United States' current account deficit.

And if you believe the data, almost all the financing came from private investors abroad, who bought about $114 billion of US securities.  That total includes around $90 billion of long-term debt.  Corporate bonds were particularly popular.   

Central banks only bought $4 billion.  I don't believe that.  I think China's monthly reserve accumulation was consistently been close to $20 billion (adjusted for valuation changes). Russia and Saudi Arabia are running monthly trade surpluses of above $10 billion, and some of that monthly surplus ends up on the books of the Russian central bank and the Saudi Monetary Authority.  The world has not stopped adding to its reserves, but rather the world's reserves related flows are not showing up in the TIC data.

I still find the headline TIC number helpful, along with the breakdown across different kinds of securities.  It is good to know that the world's surplus cash is finding a happy home in the US.  But I have little confidence right now in the official/ private split or the geographic breakdown of the flows.   More later.

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