Comments on: The April TIC data lends itself to a host of different headlines … http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/ Sat, 21 Nov 2009 16:40:10 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Brad Setser: Follow the Money » Blog Archive » It is 2004 all over again. Central banks haven’t shifted away from safe, liquid assets http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108998 Brad Setser: Follow the Money » Blog Archive » It is 2004 all over again. Central banks haven’t shifted away from safe, liquid assets Mon, 23 Jun 2008 15:20:02 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108998 [...] data understates official purchases of Treasuries and Agencies and purchases by emerging economies. Remember all those London purchases? The pattern of revisions to foreign holdings of Treasuries suggests after the US survey data is [...] [...] data understates official purchases of Treasuries and Agencies and purchases by emerging economies. Remember all those London purchases? The pattern of revisions to foreign holdings of Treasuries suggests after the US survey data is [...]

]]> By: Paul Fiore http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108787 Paul Fiore Wed, 18 Jun 2008 21:09:53 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108787 95% of all revenue from Iraqi oil sales are deposited into the Federal Reserve Bank of NY (based on UN Resolution to prevent coruption - source www.iraqrevenuewatch.org)... if these funds are used to purchase treasuries, is it reflected in the tic data? 95% of all revenue from Iraqi oil sales are deposited into the Federal Reserve Bank of NY (based on UN Resolution to prevent coruption – source http://www.iraqrevenuewatch.org)… if these funds are used to purchase treasuries, is it reflected in the tic data?

]]> By: Stefan, Tallinn http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108754 Stefan, Tallinn Wed, 18 Jun 2008 09:05:44 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108754 What will Bush's financial stimulus do on the margin: 1) increaes the demand for oil 2) increase the demand for Chinese imports=increase the Chinese currency reserve. What will Bush’s financial stimulus do on the margin: 1) increaes the demand for oil 2) increase the demand for Chinese imports=increase the Chinese currency reserve.

]]> By: Stefan, Tallinn http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108753 Stefan, Tallinn Wed, 18 Jun 2008 09:02:02 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108753 Brad Of course I cannot quantify it but as a model it's quite interesting to think like this: China's increasing reserves enable China to buy more oil/commodities - oil/c however is a limited resource x ton/day - in order to compete with China's increasing purchases (i.e defend its own purchases) the US must print USD - then this circus goes on and on. Brad
Of course I cannot quantify it but as a model it’s quite interesting to think like this: China’s increasing reserves enable China to buy more oil/commodities – oil/c however is a limited resource x ton/day – in order to compete with China’s increasing purchases (i.e defend its own purchases) the US must print USD – then this circus goes on and on.

]]> By: bsetser http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108735 bsetser Tue, 17 Jun 2008 21:52:52 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108735 Stefan -- higher oil prices should reduce China's trade and current account surplus in $ terms, not increase it. As a result they should be cutting into China's reserve growth. the puzzle is that this hasn't happened. Reserve growth in asia ex China is down. But not in China. Stefan — higher oil prices should reduce China’s trade and current account surplus in $ terms, not increase it. As a result they should be cutting into China’s reserve growth.

the puzzle is that this hasn’t happened. Reserve growth in asia ex China is down. But not in China.

]]> By: don http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108730 don Tue, 17 Jun 2008 19:58:13 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108730 jkiss: Exactly. It is the post 1930 unemployment rates that I don't think we need fear today. jkiss: Exactly. It is the post 1930 unemployment rates that I don’t think we need fear today.

]]> By: Stefan, Tallinn http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108727 Stefan, Tallinn Tue, 17 Jun 2008 19:53:12 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108727 Brad's graph of Chinese reserves looks unsustainable. Or, hm, if the Y-axis was not done in USD but oil and commodities, then maybe it would have looked quite stable. Hm, there is a correlation between the growth in prices of oil and commodities, and in Chinese reserves. Hm, if China uses its interest earnings to buy oil and commosities they cannot buy more now than a year ago. Hm, so what we are witnessing is either 1) a crashing dollar or 2) soon to crash prices of commodities and the market value of the Chinese reserve. Brad’s graph of Chinese reserves looks unsustainable. Or, hm, if the Y-axis was not done in USD but oil and commodities, then maybe it would have looked quite stable. Hm, there is a correlation between the growth in prices of oil and commodities, and in Chinese reserves. Hm, if China uses its interest earnings to buy oil and commosities they cannot buy more now than a year ago. Hm, so what we are witnessing is either 1) a crashing dollar or 2) soon to crash prices of commodities and the market value of the Chinese reserve.

]]> By: jkiss http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108725 jkiss Tue, 17 Jun 2008 19:41:33 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108725 Twofish The situation you describe is exactly what lehman did do in 1h08 - marking down their own debt by 1B is why they showed a profit in 1Q. Nothing wrong in marking to market, but if they show a profit by marking their debt, maybe they should be consistent by marking all of their level 2/3 assets... presumably their reluctance is on account this would show them to be insolvent. Don did you know that from 1929 to 1930 unemployment only rose from 3.2% to 8.7%? Not even .5%/month. It did accelerate, to 16% in 31 and 24% in 32. Money supply is shrinking fast as banks reluctantly write down losses, quite similar to GD. Twofish
The situation you describe is exactly what lehman did do in 1h08 – marking down their own debt by 1B is why they showed a profit in 1Q. Nothing wrong in marking to market, but if they show a profit by marking their debt, maybe they should be consistent by marking all of their level 2/3 assets… presumably their reluctance is on account this would show them to be insolvent.
Don
did you know that from 1929 to 1930 unemployment only rose from 3.2% to 8.7%? Not even .5%/month. It did accelerate, to 16% in 31 and 24% in 32. Money supply is shrinking fast as banks reluctantly write down losses, quite similar to GD.

]]> By: don http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108708 don Tue, 17 Jun 2008 17:39:37 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108708 JB: I'm not so optimistic, its just that I don't think the real pain will be that great. I measure 'real pain' by unemployment. JB: I’m not so optimistic, its just that I don’t think the real pain will be that great. I measure ‘real pain’ by unemployment.

]]> By: Twofish http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108701 Twofish Tue, 17 Jun 2008 16:05:12 +0000 http://blogs.cfr.org/setser/2008/06/16/the-april-tic-data-lends-itself-to-a-host-of-different-headlines-%e2%80%a6/#comment-108701 My gut feeling is that there is going to be this massive contraction in the US economy right after the election. We can see what happened in Bretton Woods II by looking at the end of Bretton Woods I, and one political strategy that Reagan used was "blame Carter for everything." DC: Why aren’t US Banking regulators at the Bernanke Federal Reserve demanding those hidden debts and financial losses be “marked to market”? 1) Hard to mark to market something for which there is no liquid market. 2) If you mark to market, you could trigger panic selling. You mark to market, this forces you to sell securities, this causes market prices to drop, this forces you to sell, this causes market prices to drop, and then the market tears itself apart. 3) Mark to market accounting also leads to some very paradoxical situations. For example, suppose I write a derivatives contract saying IOU US$1 million. If my credit is good, I can sell that contract for US$995,000. If my credit is bad, then that contract is worth US$500,000, since people are expecting me to go under. So if I mark to market using FASB rules, the fact that my credit goes bad and I'm less likely to pay means that my balance sheet improves. Cool.... My gut feeling is that there is going to be this massive contraction in the US economy right after the election. We can see what happened in Bretton Woods II by looking at the end of Bretton Woods I, and one political strategy that Reagan used was “blame Carter for everything.”

DC: Why aren’t US Banking regulators at the Bernanke Federal Reserve demanding those hidden debts and financial losses be “marked to market”?

1) Hard to mark to market something for which there is no liquid market.

2) If you mark to market, you could trigger panic selling. You mark to market, this forces you to sell securities, this causes market prices to drop, this forces you to sell, this causes market prices to drop, and then the market tears itself apart.

3) Mark to market accounting also leads to some very paradoxical situations. For example, suppose I write a derivatives contract saying IOU US$1 million. If my credit is good, I can sell that contract for US$995,000. If my credit is bad, then that contract is worth US$500,000, since people are expecting me to go under.

So if I mark to market using FASB rules, the fact that my credit goes bad and I’m less likely to pay means that my balance sheet improves.

Cool….

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