Comments on: Setser: Foreign Central Banks Still Vacuuming Up Dollars http://www.nakedcapitalism.com/2008/02/setser-foreign-central-banks-still.html Sat, 21 Nov 2009 22:38:01 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Yves Smith http://www.nakedcapitalism.com/2008/02/setser-foreign-central-banks-still.html#comment-4008 Yves Smith Thu, 14 Feb 2008 15:19:00 +0000 http://www.nakedcapitalism.com/2008/02/setser-foreign-central-banks-still-vacuuming-up-dollars/#comment-4008 Brad, <br/><br/>Thanks so much for taking the trouble to clarify and expand upon your views. The post did read as a bit cheery to me, or perhaps the better word is relieved, but that may be by virtue of contrast with your recent posts on foreign purchases of dollar assets. Brad,

Thanks so much for taking the trouble to clarify and expand upon your views. The post did read as a bit cheery to me, or perhaps the better word is relieved, but that may be by virtue of contrast with your recent posts on foreign purchases of dollar assets.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/02/setser-foreign-central-banks-still.html#comment-4005 Anonymous Thu, 14 Feb 2008 14:58:00 +0000 http://www.nakedcapitalism.com/2008/02/setser-foreign-central-banks-still-vacuuming-up-dollars/#comment-4005 I was on a yen carry trade kick about a year ago, and then sort of moved on to other issues. There has been a bit more volatility in the yen v the high carry currencies, so my sense is that the buildup of carry related positions has slowed. In any case, it is a (roughly) $200b flow, tho arguably there is a larger set of leveraged positions built off that flow, and I got caught up on the $1200b flow from emerging economies central banks to the rest of the world.<br/><br/>I basically agree with the point you make about "too much" demand for the dollar as a reserve currency impeding adjustment -- and about the rising costs of dollar pegs (and heavy management v the USD a la China) in the countries doing the pegging. <br/><br/>I also fully recognize that if this official accumulation shifted to sWFs (and the SWFs invested well -- and didn't just buy depreciating assets like blackstone) that would be a huge huge change.<br/><br/>as of now, though, there isn't much evidence that reserve growth has slowed. as a result, the risk seems to me less a shortfall of funding than too much funding impeding adjustment.<br/><br/>incidentally, I didn't really intend to write an optimistic post -- i wanted to highlight what strikes me as a real problem/ ongoing distortion in the global economy.<br/><br/>bsetser I was on a yen carry trade kick about a year ago, and then sort of moved on to other issues. There has been a bit more volatility in the yen v the high carry currencies, so my sense is that the buildup of carry related positions has slowed. In any case, it is a (roughly) $200b flow, tho arguably there is a larger set of leveraged positions built off that flow, and I got caught up on the $1200b flow from emerging economies central banks to the rest of the world.

I basically agree with the point you make about “too much” demand for the dollar as a reserve currency impeding adjustment — and about the rising costs of dollar pegs (and heavy management v the USD a la China) in the countries doing the pegging.

I also fully recognize that if this official accumulation shifted to sWFs (and the SWFs invested well — and didn’t just buy depreciating assets like blackstone) that would be a huge huge change.

as of now, though, there isn’t much evidence that reserve growth has slowed. as a result, the risk seems to me less a shortfall of funding than too much funding impeding adjustment.

incidentally, I didn’t really intend to write an optimistic post — i wanted to highlight what strikes me as a real problem/ ongoing distortion in the global economy.

bsetser

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