The Treasury International Capital data for July came out this morning, and it once again revealed a far larger outflow of money than anyone expected.
In fact, for a country borrowing as much as the US, anything less than a few hundred billion to the positive every month is a really big problem. If you’ve been wondering why the dollar has been going down, here’s part of your answer….money is flooding out of the US.
Monthly net TIC flows were negative $97.5 billion. Of this, net foreign private flows were negative $131.3 billion, and net foreign official flows were $33.8 billion.
And look at that difference! Central banks pumped nearly $34 billion into the US (in their valiant but misguided attempts to keep the entire ship from rolling over, I suppose), while private investors withdrew a stunning $131 billion.
Central banks in, everybody else out.
And where was the greatest damage located? Within the private bank accounts of foreign private residents, who removed $85.7 billion from US banks and took their money home (that’s what this next sentence means):
Banks’ own net dollar-denominated liabilities to foreign residents decreased $85.7 billion.
When we view this on a long-term chart, the “change in trend” is immediately apparent and quite severe looking:
For a nation that is borrowing more than a trillion dollars in fresh debt, and is still running a $300-$400 billion dollar trade deficit, it is imperative that more money flows into the country (specifically into its financial assets) than flows out of the country.
by pinecarr