Dan Norcini has put up 2 charts relating to the TIC report. They are in .pdf form, so you can blow them up, enlarge them, grab them, move them around and so forth. See them real good. Links to them are further below in this post. He started the charts when the USD Index went below the psychologically important 100 level. The USD Index topped out at around 121 at the beginning of 2002. USD Index overall chart patterns are indicating a low of about 60, although that can take a couple of years to happen assuming some nuetron bomb in the otc derivatives scene does not go off.
The first chart is "Balance of Trade vs. Net Capital Flows". "Balance of Trade", or the US trade deficit, is a negative number and is upward sloping indicating a growing US trade deficit. The last two monthly numbers are less than the trade deficit. There is less time between this most recent negative number group and the last negative number group than the time period between the last negative number group and the negative number group before that one.
We need to watch to see if "Net Capital Flows" are going to stay below the US trade deficit for 4 months instead of 3 months this time. Of course at some point they are going below the trade deficit and stay below the trade deficit because of the huge amounts of debt of every kind that the US has and is continuing to build up even more. After all, there is only so much savings in the world for the US to borrow. And even right now the US is not wealthy enough to pay back, in real terms, all that it has borrowed from the rest of the world. If and when the "Net Capital Flows" do get bigger than the trade deficit again, we need to watch by how much that happens as well as for how long. The world is looking for a trend change here.
Here is the link to the "Balance of Trade vs. Net Capital Flows" chart. Feel free to save it to your hard drive.
The second chart is the US Treasury holdings of Japan, China and South Korea, the US's big three customers. The countries with the big amounts of USD denominated central bank reserves. My eye says the amounts are in decline.
Here is the link to the chart of US Treasury holdings of Japan, China and South Korea. Fell free to save it to your hard drive.
Remember, the US Treasury changed all the numbers in the series starting with the last report for the numbers ending in March. The US Treasury changed the numbers downward so that the lower March numbers did not look so bad historically, I guess. The US Treasury did this with no note saying that they did it let alone a note explaining why and how. So these numbers are suspect. Actually, now a days, I can't think of any numbers that matter from the US government that can be really trusted.
Ultimately the real situation will be seen in the USD Index (the FX markets) and the US Treasury note and bond markets. These are the markets that are going to impose the disipline on the US, the markets that are going to get the Piper "hell or high water".
When it gets to the point where the US can not borrow enough to maintain its current life style, standard of living, the US Treasury is going to start sending IOUs to the Fed, who takes those as an asset and starts creating digitial USD with strokes on a key board and sends the digital USD back to the US Treasury. So the Fed at no cost to itself creates digital dollars for the US government and gets paid digital interest year after year for doing it. Such a deal! The US government will then spend those new digital dollars into the economy thus compounding the problem called inflation, which is a tax, or maybe hyper inflation, which is a hyper tax, if history is any guide.