Treasury International Capital report

[bart]

Released today, numbers for June.

China & Caribbean down, Japan & UK & Brazil & HK & Singapore up.

http://www.nowandfutures.com/images/tic_major_holders.png








A fuller picture, which includes short term items - 3 months in a row below zero on net total (black line), very much not pretty.

http://www.nowandfutures.com/images/tic_net_short_term.png








And my unique picture of capital flows against the dollar, since 1992. I simply start with TIC flows and then subtract the trade deficit and the budget deficit (both reported and the real total budget deficit which includes off budget items) and then chart it, after smoothing them with a moving average.

It could be viewed as either a capital flow statement, or also (and my preference) as a profit and loss statement of the entire US government.
Fundamentals always win, given enough time.


http://www.nowandfutures.com/images/tic_trade_budget_usdx1992on.png



Same chart, but using the broad dollar index rather than the USDX.

http://www.nowandfutures.com/images/tic_trade_budget_broad_1992now.png

[marvenger]

that looks like the US dollar is headed for a pummelling

[ricket]

Released today, numbers for June.

http://www.nowandfutures.com/images/tic_major_holders.png

That sure is a crazy chart!

http://dalefloer.com/Stuff/Small/Squiggles.jpg

[*T*]

Bart, how does your methodology differ from Setser / Pandey?
I am trying to get to grips with this now Setser is gone.
thanks
t

[vinoveri]

Specifically if the US government itself is going for a $2T/2009 and $9T/2012 deficit, it does not appear that it is even possible for foreigners to be able to fund even a fraction of that.

While US savings rate is 'going up', it also seems unlikely that there is enough money to fund this massive deficit.

p.s. while checking out your site: www.NowandtheFuture.com (http://www.NowandtheFuture.com) - I noticed in the Treasury holders report current to June 2009 that the UK had a massive increase in Tbond holdings.

This is amusing considering they are running massive government deficits. Is this a dichotomy of private vs. public or a case of 'covering each other's 6' (covering each other's deficits)?

Bingo. This is what I have assumed (feared) all along was going on.

The idea that someone's "savings" necessarily has to fund deficits is the erroneous assumption in our global fiat world IMO. Cheney was right (unfortunately) "that deficits don't/needn't matter" as long as CONfidence can be maintained and the governments and financail oligarchs work out a mutually agreeable scheme.

This is what I think is going on now; it could blow up if the different nations can't continue to agree, but concessions by the U.S. and other debtor nations (concessions that we won't know about until our grandchildren read about them in the history book - just like we read now about all the stuff that was hidden from the public throughout the GD, WWII, etc.), could cement the scheme and facade.

Imagine there was only one fiat currency in the world, and that a world CB could set the funds rate and "print" whatever and whenever it wanted to. The amount of "capital" could be expanded at will without needing anyone's "savings".

If someone offers you $100 bill for your labor, do you ask "is this backed by gold?" or "who's savings did you borrow this from?". No. the only question asked is "what can I exchange this for, what can I buy with it?" So as long as the $ can buy (with inflation kept under reasonable control) things, and the purchasing power is kept from imploding, fiat will be accepted.

The idea of a liquidity trap is also somewhat erroneous as we see now in the global asset markets. You will be made to spend and invest, because your cash holdings will diminish through debasement if you do not. Pushing on a string? Sitting in cash why assets and commodities go through the roof, and your cash is crashing in purchasing power is not a scenario most will stomach, and thus they will pile into the fray.

[c1ue]

Bart,

Out of curiosity - do you also track the overall funds flows?

I saw this from Jim Willie: apparently Eric de Groot source:

http://www.gold-eagle.com/editorials_08/willie082009.html

2043

The trend in general and the shorter term graphs have been noted by iTulip and yourself. I've seen something similar somewhere else as well, but this picture seems particularly damning.

Specifically if the US government itself is going for a $2T/2009 and $9T/2012 deficit, it does not appear that it is even possible for foreigners to be able to fund even a fraction of that.

While US savings rate is 'going up', it also seems unlikely that there is enough money to fund this massive deficit.

p.s. while checking out your site: www.NowandtheFuture.com (http://www.NowandtheFuture.com) - I noticed in the Treasury holders report current to June 2009 that the UK had a massive increase in Tbond holdings - from $123.9B in January 2009 to $163.8B in May 2009 to $214B in June 2009 (!)

This is amusing considering they are running massive government deficits. Is this a dichotomy of private vs. public or a case of 'covering each other's 6' (covering each other's deficits)?

pps. Extending the above to the top 3 (China, Japan, UK) the net increase in the past year is $484.1B in Treasury holdings. This would imply what iTulip has said before: the net foreign purchases of US bonds at least is net negative for the ROW outside of Treasury purchases.

[jk]

a lot of the middle eastern oil producers run their money through london-based investment offices. thus oil money gets recycled back to the u.s. via the u.k. [this also obviates their concerns that some political fracas might result in the freezing of assets they held directly in the u.s.]

[rabot10]

Bart,

Great charts thanks – would you mind explaining them to me as if I were like eight years old? Please.
<O:p
I see from the other post that this is not good, but in what way and how will this affect the economy in the short to long term.
<O:p
Thanks Bart for your hard work

[c1ue]

This is what I think is going on now; it could blow up if the different nations can't continue to agree, but concessions by the U.S. and other debtor nations (concessions that we won't know about until our grandchildren read about them in the history book - just like we read now about all the stuff that was hidden from the public throughout the GD, WWII, etc.), could cement the scheme and facade.


Sorry - confused by the thread merge!

Anyway the scenario you speak of is absolutely something which can work in the short term, but I guess the $64,000 question (or 1 donut in 2015) is what type of concessions could the US/UK/Japan possibly make which would incentivize the creditor nations to continue the game? Especially when the funding need is growing rather than shrinking.

As I've noted before - it is unclear if there is enough money in the entire ROW should the US continue its spending policies; China/UK/Japan/ROW combined is not going to be able to buy even $1T/year of Treasuries barring a major dollar devaluation.

In the case of a major dollar devaluation - the existing dollar 'savings' would be savaged.

Thus the question I continue to ponder is: why bother?

A partial answer is of course that it is in the ROW's interest to smooth out the fall of the American financial empire, but that also assumes America is sanguine about its fate and doesn't 'double down' in an attempt to squeeze maximum dollar purchasing power out quickly.

[jk]

Sorry - confused by the thread merge!

Anyway the scenario you speak of is absolutely something which can work in the short term, but I guess the $64,000 question (or 1 donut in 2015) is what type of concessions could the US/UK/Japan possibly make which would incentivize the creditor nations to continue the game? Especially when the funding need is growing rather than shrinking.

As I've noted before - it is unclear if there is enough money in the entire ROW should the US continue its spending policies; China/UK/Japan/ROW combined is not going to be able to buy even $1T/year of Treasuries barring a major dollar devaluation.

In the case of a major dollar devaluation - the existing dollar 'savings' would be savaged.

Thus the question I continue to ponder is: why bother?

A partial answer is of course that it is in the ROW's interest to smooth out the fall of the American financial empire, but that also assumes America is sanguine about its fate and doesn't 'double down' in an attempt to squeeze maximum dollar purchasing power out quickly.
if discretionary consumption is down, china isn't sending things our way and we're not sending dollars china's way. so what nations do you think are getting new dollar income? those are the only countries in a position to do any deals going forward. and i think they're the oil exporters and virtually no one else. any other nominees?

[c1ue]

if discretionary consumption is down, china isn't sending things our way and we're not sending dollars china's way. so what nations do you think are getting new dollar income? those are the only countries in a position to do any deals going forward. and i think they're the oil exporters and virtually no one else. any other nominees?

Certainly the oil exporters will continue to get income, but their income isn't going to be sufficient to fund ongoing US/UK debt needs (Japan thus far still feeding off its internal population's savings).

http://www.eia.doe.gov/emeu/cabs/OPEC_Revenues/Factsheet.html

Based on projections from the EIA August 2009 Short-Term Energy Outlook (http://www.eia.doe.gov/emeu/steo/pub/contents.html) (STEO), members of the Organization of the Petroleum Exporting Countries (OPEC) could earn $555 billion of net oil export revenues in 2009 and $667 billion in 2010. Last year, OPEC earned $968 billion in net oil export revenues, a 42 percent increase from 2007. Saudi Arabia earned the largest share of these earnings, $285 billion, representing 29 percent of total OPEC revenues.

[*T*]

p.s. while checking out your site: www.NowandtheFuture.com (http://www.NowandtheFuture.com) - I noticed in the Treasury holders report current to June 2009 that the UK had a massive increase in Tbond holdings - from $123.9B in January 2009 to $163.8B in May 2009 to $214B in June 2009 (!)


According to Setser, the UK purchases are always revised down, and China's revised up, because the unrevised numbers reflect substantial Chinese purchases through the London markets (due to time zones etc).