They're wising up...
"An ominous harbinger for U.S. financial assets," writes
our friend Terry Reik of Clapboard Hill Partners, "has been the stunning collapse in foreign-capital flows... From a peak of $110.4 billion in May, net foreign flows have fallen to $90.6 billion in June, to $73.4 billion in July, to $49.9 billion in August, to $4.2 billion in September."
September's net inflow, Terry explains, is only 10% of the
monthly minimum required to fund our $500 billion current
account gap. Private interests overseas have forsaken the
dollar in favor of other assets.
So far, only central bank buying of dollars - or, buying
U.S. dollar assets, such as Treasury bonds, thus lending
money to the Bush administration - has kept the dollar from destruction. In September, for example, while the rest of the world was dumping dollar assets, the Bank of Japan was spending $40 billion to support the dollar. "Without this Herculean effort by Japanese authorities," Terry continues, "foreign flows would have been an unthinkable negative $35.8 billion." |
