Always remember this

I can’t tell you how many times I have seen people use the unrevised TIC data to argue that the US is not all that dependent on foreign central banks. Always remember that they don’t know what they are talking about. From Brad Setser….

The scale of these revisions raises questions about a lot analysis that suggested that official inflows weren’t a major reason why Treasury yields remained low in 2005 and 2006. That analysis was based on the observation that yields didn’t rise after official flows – as reported in the TIC data — fell. Alas, it turns out that official flows didn’t actually fall. The TIC data just didn’t capture most of the flow — as China and the Gulf tend to buy through London. After the survey revisions, the US now thinks official flows for 2006 topped official flows in 2004.

What of the last four quarters? The US data indicates that official creditors provided the US with about $400b in financing — less than in 2006. It also indicates that “private” investors abroad bought about $250b of Treasury bonds (including short-term bills). If you believe that private investors abroad bought that many Treasuries, I have a lot of formerly triple AAA CDOs stuffed with subprime debt that I want to sell you at par.

The US Treasury made the direction of the likely revisions to the data totally clear in the last survey. It noted that the survey indicated that ALL of the increase in foreign holdings of Treasuries and most of the increase in foreign holdings of Agencies between June 2006 and June 2007 had come from the official sector (see p. 16 of the .pdf/ p. 14 of the udnerlying document). There isn’t good reason to think this has changed dramatically. If I add “private” purchases of Treasuries to the official flow data, the total is roughly equal to the current account deficit.

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