Subscribe to this blog's feedBrad Setser has a look through the BIS quarterly report and picks out a couple of fascinating diagrams showing net capital flow around the world.
Remember the diagrams are net - so there's not much of a flow between, say, the UK and the Eurozone, not because there's no investment, but because there's roughly the same each way.
Two points. First, there's a huge net inward flow to the US - yes, we all know about that, but the diagrams show exactly how big.
Second, as Setser points out, a different diagram would show gross, not net flows - and would show that the true hub of the world's financial system, in the sense of the area with maximum inflow and outflow, is not the US, but Europe - and London in particular.
Or is he wrong? Thoughts?
Comments (1)
The different diagram comes 2 pages earlier in the report: it's graph 4, as opposed to graph 5, where the circles change in size according to (and this is where I start getting a bit lost, but I think it's what you're looking for) "the share of resident banks’ cross-border claims in total cross-border claims of BIS reporting banks". And indeed the UK has the largest circle, with the Euro area close behind, and both of them vastly bigger than anybody else. (There's kind of a three-way tie for third place between the US, the Caribbean, and Japan).
One interesting thing about graph 4 is that nothing has really changed since 1997.
Posted by Felix Salmon | December 14, 2006 8:54 PM
Posted on December 14, 2006 20:54