Quote Originally Posted by bart
http://www.nowandfutures.com/grins/crowd_cheer.wav :-)

Nicely done, jk. Your way of looking at it is fine by me and aligns well with more conventional economic thinking too, and would also likely make more sense to those who prefer that view. Ye olde bottom line after all is having your own understanding and not blindly accepting some interpretation that doesn't work for you.

You're also quite correct that TIC is far from a complete stat and its very possible and likely that if stuff like direct investment was included, the correlation would be even higher. Quite frankly, I was surprised when I put the original chart together and saw how high the correlation was with just the raw numbers.

As far as using the current account deficit, it may very well be a touch more accurate but it has two severe problems that exclude it for my purposes - its only a quarterly stat and also has quite a large reporting lag after the end of a fiscal quarter.

But here's the two charts from the Fed - they may help answer your question:

I'm tempted to add your view as a subnote to the article after some very minor cleanup - if that is ok with you?
sure, it's ok with me.