Tourniquets, please!

Full article here. From Brad Setser at the CFR. Gads the money inflows/outflows are gawd awful, again.

 ”Indeed, the real legacy of the crisis has been an enormous contraction in long-term flows, with a corresponding increase in the United States reliance on short-term financing. And also a shift away from risk assets.

One striking fact is that foreign investors now consider Agencies to be a “risky” asset. Over the last 12ms, foreign investors –in this case, primarily central banks, as they were the main foreign buyers of Agency bonds– concluded that the Agencies aren’t a safe long-term store of value.

Another is that demand for US equities has disappeared. Over the last 12 months of data, foreign investors have only purchased $24 billion of US equities. The impact of the fall in foreign demand for US equities though has been offset by an equally sharp fall in US demand for global equities. Indeed, Americans have been net sellers of the rest of the worldâ??s stocks over the last 12 months.

See those two wonderful bubbles in 1999 and 2004? Bubble go ‘pop’ now…actually with how fast it’s deflating it’s more like an airlock being opened up in space, proving that old addage that the Bulls go up the stairs but Bears go out the window.

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