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April 15, 2005
Financing our debt
Brad Setser comments on the Treasury's report on international capital flows for February.
Punch line:
In other words, after a bit of foreign interest in the US equity market in January, old patterns reasserted themselves in February. The US financed itself exclusively by the sale of long-term debt securities.
In an update to his post, Setser takes note of China. In particular, there is evidence from the flow data that China is buying large quantites of long term debt from us, but that is not showing up in the stock data, or for that matter, in the central bank data.
I agree with his bottom line:
Bottom line: there is no perfect measure of even the direct impact of foreign central banks on the US market.
Though I was a little disappointed in the lack of interest in equities, I can't say that anything in there surprised me too much aside from the abovementioned discrepancy concerning China. Given recent declines in the stock market and the recovery of the bond market, I would expect this pattern to continue at least through the April data and perhaps beyond.
Read the comments on Brad's post too. There is a mention of the latest attempt by the administration to get the Chinese to start floating the yuan. In response, Brad says,
... I suspect the intended audience is more "peoria" than "beijing,"...
Thanks for the Peoria reference, Brad! Anyway, this Peorian thinks that Beijing will do what it will on their own terms and in their own time.
Posted by William Polley at April 15, 2005 11:50 AM
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