Wednesday, April 11, 2012

From the IMF's...

...Global Financial Stability Report. Economicst often get the causalities wrong when considering trade balances and Current Account balances. The issue is not the goods going from one place to another. Its about the relative scarcity of "safe" financial assets. This is both the cause of the U.S. Current Account deficit and the primary reason that Treasuries continue to "fly off the shelves".

Its not an "imbalance". It is a reality in a more dangerous, more uncertain world.

…In the United States, foreign investors have dominated the market for U.S. Treasuries in view of its large size and depth and its high perceived degree of safety. However, post crisis monetary stabilization efforts increased the prominence of the Federal Reserve as a holder of government debt.

In Europe and Japan, domestic banks have played an important role as sovereign debt investors, in each case accounting for about 25 percent of outstanding sovereign debt (Figure 3.6). In the United Kingdom, insurance companies and pension funds have been traditional holders of government securities, although the Bank of England and foreign investors assumed a more prominent role after the global financial crisis.

No comments: