Setser: Foreign Buys of US Assets Increasing Dislocation

Monday, March 24, 2008


Brad Setser, a source for thorough, thoughtful coverage on currencies and related topics, provides his monthly parsing of the Treasury International Capital report (this one from January, plus its survey of foreign holdings of US securities as of the end of June 2007) and does not like what he sees.Since the August TIC report, Setser has identified a worrying trend, that private foreign capital inflows (required to fund our massive current account deficit) have pretty much dried up. Nearly all our international ifunds come from governmental sources, namely central banks and sovereign wealth funds. Even more troubling, Sester sees signs that the overseas buyers are participating heavily in the flight to safety (Treasuries), exacerbating market instability.

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