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Global Money Flow: Emerging vs. Developed Economies at Trader’s Narrative

That giant sucking sound you hear in the background is the emerging economies vacuuming up all the cash from developed economies. Nothing shows it quite as clearly or as strikingly as the following map:

Global Money flows
Source: Wikipedia

The map shows each country by gold and foreign currency reserves minus external debt. It is based on 2009 data from the CIA Factbook (click chart for a much larger version in a new tab).

Europe and the US are deep red while emerging economies like China, Brazil and Saudi Arabia are green. I was surprised to see Japan not in the red. But the other developed countries such as Norway, Canada and Australia were orange. No surprise there as these countries have benefited from the secular bull market in commodities.

Just recently BHP Billiton (an Australian conglomerate) launched a hostile bid for Potash (one of Canada’s largest public corporations). The bid was quickly rejected but BHP hasn’t given up.

In any case, these two themes; secular bull in commodities and emerging markets overtaking developed ones, are broad strokes that don’t affect the markets within a short period of time. But make no mistake, such slow moving trends have staying power and they will remake the global financial landscape before they are done.

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2 Responses to “Global Money Flow: Emerging vs. Developed Economies”  

  1. 1 jb

    How come the US does not benefit from the commodities bull? Perhaps, oil imports are enough to counterbalance everything else. But, one would have thought that the US would be doing well in soft commodities (so much land) as well as atleast some of the other commodities?

  2. 2 Mike

    All those cash China et al are sucking up represent printed up (conjured up) MONEY from the the developed nations. In exchange for these CASH the developed countries get the labor and products that help sustained a higher standard of living for the developed countries. Since the US and most developed nations (but not the EMU nations) are not revenue constrained due to the nature of the non-convertible free floating exchange currencies, essentially we traded pieces of paper for real goods and services. A pretty good deal if you ask me. What can the BRICs do with these cash other to continue to hold bonds of the developed nations? Even China buying up commodities really is just a recycling of these CASH to another developing nation or nations. The US continue to print up cash to meet its funding needs as the nations continue to soak up these cash to feed their exporting machines. In the end, I fear the BRICs stand to lose more in this process than the developed nations.

    PS. The chart really represents the Current Account Balance. Since most developed nations are running deficits it would stand to reason that the cash flow will continue to move toward the Current Account Surplus nations.

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