Brad Setser Profile picture
Aug 25, 2023 8 tweets 3 min read Read on X
Perhaps the most boring chart in the world

The shares of the major currencies in global reserves, as reported to the IMF.

1/ Image
The dollar's weight in global reserves is roughly 3 times the United States weight in the global economy (maybe a bit less0; the euro's weight is close to its weight in the global economy -- and China still punches way below its weight, for obvious reasons!

2/
A far more interesting chart showing global reserves --

The big, interesting important story isn't shifts in share ... but the huge increase in reserve holdings from 02 to 14, and the subsequent reduction in the pace of accumulation.

3/ Image
A technically demanding global reserves chart -- one showing actual flows (purchases + retained interest income) by currency.

The bond market adjustment complicates everything; I don't yet have a good bond market adjustment for the euro.

4/ Image
China's reserve sales in 15-16 obviously figure heavily in that chart ...

and there was a quite large pickup in reserve accumulation in 2020-21 that we now tend to forget.

5/ Image
And some of the most interesting stories told by the reserves data have nothing to do with China --

For example, EM Asia sold a lot of reserves last summer and fall, in what I think was a successful defense against an overshot of their currencies when oil was high!

6/ Image
And, as I have noted many times and in many different ways, looking only at formal reserves misses much of the picture these days -- China has as much money in state banks, its policy banks and state investment funds as it holds in its formal reserves ...

7/7 Image
So there are stories to tell that don't hinge on creatively graphing these two lines ...

8/8 Image

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Brad Setser

Brad Setser Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @Brad_Setser

Apr 3
Some ball park tariff math based on the estimated increase in tariffs from @EtraAlex -- the just pay it cost of today's tariffs are around $500b (1.75% of US GDP), the total Trump 2 tariffs are around $750b (2.6% of US GDP).

1/ Image
The "just pay it" cost isn't a good estimate of actual revenue -- trade adjusts down, so actual tariff collections are lower. But it is a decent baseline for estimating the short-run shock --

2/
For example, if the elasticity of trade to the tariffs is around 1, US imports would fall from ~ $3.25 trillion to ~ $2.5 trillion (a fall of $750b). That is getting close to a percentage point of WGDP if the US is excluded. Not quite there, but close

3/
Read 10 tweets
Apr 1
Martin Wolf seems to think China's recent export surge has reached its natural limits: "investing even more in manufacturing just guarantees ever more excess capacity and thus protection aimed against the inevitable surges of Chinese exports"

nice chart too ;) Image
Wolf confirms that China seems a real upside in Trump's global trade war --

ft.com/content/80ab4a…
Hard to disagree

"what is happening to the US has clear upsides for their own country [China]. It has dawned on just about everybody by now that Trump’s signature is worthless. A man who is trying to demolish the Canadian economy is not going to be a reliable friend to anybody else"
Read 5 tweets
Mar 31
The Saudi balance of payments for q4 is out, and it confirms that Saudi Arabia ran a current account deficit in 2024 -- and (per my estimates), the balance of payments "breakeven" for Saudi Arabia is around $90 a barrel.

1/ Image
One implication, of course, is that the Saudis are on track to run a substantial external deficit in 2025 --

(@Rory_Johnston can improve the estimated breakeven with a better net oil exports number for 2024!)

2/ Image
@Rory_Johnston Spending on imports (broadly defined, includes services) is above where it was back in 2014 -- The various MBS visions didn't come cheap

3/ Image
Read 9 tweets
Mar 31
I haven't loved those trade offs to be honest --

Say a US firm gets access to Korea's local market to sell insurance. It won't employ Americans to run that business ... the firm's global business benefits, but there is little impact on the US economy

1/
The classic example is TPP, where the US would have liberalized the US auto market (the 'TPP" content requirement was lower than the "NAFTA" content requirement) in exchange for stronger protection of offshore pharmaceutical IP

2/
That would have raised the offshore profits of US big pharma (i.e. more production and profit in Singapore) but not generated more direct activity in the US as big pharma never liked manufacturing in the US for global sales (and paying US tax)

3/
Read 4 tweets
Mar 31
One sign of "American exceptionalism" (US equity outperformance + sustained demand for US debt through thick and thin) is that the US has a lot more external liabilities than external assets.

A lot more!

1/ Image
I have focused heavily on the net external debt position precisely because it doesn't hinge heavily on stock market valuations (and the FDI position is a bit problematic as foreign FDI is valued using the US stock market). 2/ Image
Of course valuation still plays a small rose there -- the market value of foreign holdings of US bonds is about $1.5 trillion below the purchase price (using the sum of flows)

3/ Image
Read 13 tweets
Mar 31
I usually focus on non-petrol trade because oil has its own unique dynamics. But if there really is an across the board 20% tariff on all imports, the pre-tariff baseline is imports of 11% of GDP ...

1/ Image
Some simple tariff math. The "just pay it" cost is thus 2.2% of GDP. But actual tax revenue from the tariff will be lower. If the short-term elasticity is 1, imports fall by a little more than 2% of GDP, to around 9 pp of GDP & the direct tax revenue is 1.75 pp of GDP. 2/
That is a big sum, particularly as it is being put in place ahead of any offsetting tax cuts. Moreover as @jnordvig highlighted over the weekend, Trump is taking a real risk by implementing the tariff in a way that maximizes uncertainty ... 3/
Read 11 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(