Foreigners Buy Fewer U.S. Securities

Foreigners bought $56.6 billion of U.S. securities in December, off 38% from November’s $91.6 billion and a 7-month low. The monthly trade deficit for December was $65.7 billion. Why are these figures important?  Because the U.S. needs ever increasing amounts of foreign capital to finance its ever increasing current account deficit. Why does America have an ever increasing current account deficit? Because it spends more than it earns, which is only sustainable to the extent that its lenders and merchants are willing and able continue building up the house of cards. Of course, if any of them blink, however, it could spark a rush for the exits, which would be bad for everyone of course, except perhaps speculators who are able to get in front of the adjustment. Cheers!

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