Monday, January 24, 2005

Follow Up on What Me Worry

In another link from the Finacial Times we have some additional details.

In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asian central banks accounting for 86 per cent of flows.

A similar picture is emerging for 2004. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, central banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (€159bn) in 2004, financing nearly a third of the US current account deficit, estimated at $650bn.

While I am far from an economist even I get jumpy at the thought of some other country owning 83% of us. Couple this with the previous post and you may begin to see that the energy is being stored for something big and bad. If memory serves I paid a $1.18 for one Euro in November and today(I just checked) it is a $1.31. That may appear to be ONLY 13 cents but it is a huge number.

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