Treasury International Capital (TIC) flows

[ubiestmea]

Looks like a trend is developing, the previous 3 results were 126b, 97.3b, 19.5b and today’s was -69b, the first negative since 1998. With a falling dollar and falling interest rates seems foreigners have lost their appetite US long-term securities. How ugly will it get if the FED continues to cut interest rates and the dollar continues to fall? Why would anyone want to buy US debt in this environment?

http://www.treas.gov/press/releases/hp611.htm

[gonebroke2]

This is just more evidence that the USD is in bad shape. Also more proof that gold is going to 4 digits very soon (currently 760USD/oz).

[DcifrThs]

[ QUOTE ]
This is just more evidence that the USD is in bad shape. Also more proof that gold is going to 4 digits very soon (currently 760USD/oz).

[/ QUOTE ]

gonebroke2, you make very authoritative glib statements. i'll gladly take you up on a wager about gold going to 4 digits "very soon" name your date and your price and i'll almost surely take the other side (assuming your definition of "very soon" is even remotely close to mine).

now, in terms of the TIC flows, there is a lot going on and i'm sure you didn't look into it gonebroke2.

1) the bulk of the the 69b fall came from net equity sales abroad in august. indeed, -40.6billion dollars of equities were sold. that is over 50% of the fall. this reflects a risk aversion and the turmoil that happened in august. no other month has had anywhere near such a huge shortfall of private equity sales since 1978 (when TIC historical data began). the next largest equity sale was -11billion in 2001.

2) coinciding with this risk averse atmosphere, private purchases of treasury bonds and notes were up 27.1billion. official purchases of same, however were down. this reflects the main problem of global imbalances that is now coming to light (huge current account deficit until now financed by capital account inflows and foreign governments disproportionally holding US securities as their main FX reserve asset)

3) US residents continue to purchase foreign equities and bonds to the tune of 34.5billion (a net negative outflow so it is recorded as -34.5billion).

4) the overall (and important but not reported for some reason) monthly net TIC flow was a whopping -163billion. that is by FAR the largest negative number on record. the next largest outflow was -42.2billion. this number is mostly from banks' own net dollar-deonominated liabilities. this change was -111.4billion. that is absolutely huge. other times when this happened (-129billion in june 2006) there were offsetting large "other negotiable instruments and select liabilities" purchased by foreigners...in june 2006 it was 54billion). in this case though, that number was -14.5billion.

so as you can see, the picture was very bleak (and will definitely improve in september due to equity rally and reduction in risk aversion).

overall, we have a huge problem coming up and i think the yield curve will continue to steepen as a result. but to say that the dollar will just continually tank is nonsense imo.

just as the current situation is unsustainable, the long term fall of the dollar is also unsustainable. already major int'l organizations are calling for an appreciation (IMF, world bank) to come soon due to fundamental economic flows becoming attractive at relatively low prices.

so gonebroke2, state yoru terms for this very soon 4figure gold bet and lets do it.

Barron

[gonebroke2]

Barron,

Why does a difference of opinion always have to resort to one guy challenging the other to a wager? You already lost your first gold bet to another poster (i forgot his handle).

Anyways, I love to gamble. So lets gamble. I believe it will be 1000USD+ sometime during 2008, but I guess that might not qualify as being "very soon." So how about by July 1st 2008. Even money wager, pay by FTP interaccount transfer. 500 max bet, you get to pick how much. Honor system or 3rd party member holding our funds to guarantee payment? Whatever you want.

[DcifrThs]

[ QUOTE ]
Barron,

Why does a difference of opinion always have to resort to one guy challenging the other to a wager? You already lost your first gold bet to another poster (i forgot his handle).

Anyways, I love to gamble. So lets gamble. I believe it will be 1000USD+ sometime during 2008, but I guess that might not qualify as being "very soon." So how about by July 1st 2008. Even money wager, pay by FTP interaccount transfer. 500 max bet, you get to pick how much. Honor system or 3rd party member holding our funds to guarantee payment? Whatever you want.

[/ QUOTE ]

it doesn't always have to resort to a gamble...but dude, this is a poker site [img]/images/graemlins/smile.gif[/img]

i definitely lost the first gold bet due to an analytical mistake. that is how i learn though.

i mean, gold COULD still fall 120 points lol, but not likely.

anyways, i will gladly do the July 1st 2008 bet of spot deliverable gold being less than US$ 1000.

i'll bet $500 USD (though in your opinion that may be worth only a few cents by then [img]/images/graemlins/tongue.gif[/img]).

so terms:

FTP (or major poker site) inter account transfer of $500 to the winner from the loser.

If spot gold is less than $1000US for the entire period between now and then, you transfer $500 to me.

if spot gold touches $1000US during that period, i transfer $500 to you.

i don't believe we need an escrow so i'm fine with the honor system.

let me know either here or via PM on the confirmation of the terms.

thanks,
Barron

[maxtower]

I don't understand something about all this weak dollar stuff. The US has been claiming that inflation has been < 4% for the last 5 years or so. The European Central bank has pegged their inflation statistic at around 2% over this same time period. (I don't have any stats in front of me, but correct me if measured inflation in either currency wasn't low single digits over the last 5 years.)

Since the dollar has fallen about 30% as measured in Euros over the last 5 years, either the inflation measurements are incorrect or there has been some big speculation in the currency markets, or some combination of the two.

What gives? Why aren't people buying a bunch of crap (whose prices have remained stable in the US and Europe) here in the states and selling it to Europeans for a 30% gain?

For example, (assume there aren't any region encoding problems) you could buy newly released video games here in the states for $50 over the last 5 years. Prices for games in Europe have also remained stable. But now with 30% currency appreciation, there is an opportunity.