Gary North
The Astounding Reversal Continues: Bernanke’s Nightmare
April 16, 2009

Yesterday, the U.S. Treasury released the Treasury International Capital (TIC) report for February 2009. It shows another outflow of capital. “Monthly net TIC flows were negative $97.0 billion. Of this, net foreign private flows were negative $106.3 billion, and net foreign official flows were positive $9.3 billion.”

The figure for January was updated to minus $147b from the previously reported minus $149b.

http://www.ustreas.gov/

This is a huge reversal. That is almost a quarter of a trillion dollars in just two months. Foreigners are not bailing out the Treasury any longer. They are pulling out. They are net sellers.

This means that domestic buyers must be found — not just for the gigantic wave of debt already on the books but also for the foreigners who are saying sayonara.

The FED has not budgeted for this. It has pretended that the much-heralded glut of international savings would continue. It’s over. It’s not just over; it’s imploding. We are now seeing a glut of selling.

This will create havoc for the government. The days of wine and roses has ended. The bailouts from outside the country have gone into reverse.

This will put upward pressure on Treasury interest rates. If and when the recovery overcomes fear of other assets, the sell-off of Treasuries by Americans will begin. The Treasury will have to offer higher rates. Goodbye recovery.

Or the FED will have to buy. Goodbye dollar.

The day of reckoning is now visibly approaching. But no one is sounding the alarm. This is ignored. It’s business as usual on Wall Street.