the real legacy of the crisis has been an enormous contraction in long-term flows, with a corresponding increase in the United States reliance on short-term financing….It may not be financial deglobalization, but it certainly is a major slowdown in financial globalization.


He goes on to outline three trends:

  • Foreign investors now consider Agencies to be a “risky” asset
  • Demand for US equities has disappeared

    • $24b in purcahses over the past 12 months
    • but offset by a sharp fall in US demand for global equities. Part of this is attributed to a reversion from the short-term strategy of central bank and sovereign wealth purchases of US equities in response to pressures on these institutions to increase returns on dollar reserves when the dollar was falling. 
      • Americans have been net sellers of the rest of the world’s stocks over the last 12 months.
  • The overall result of the crisis hasn’t been a rise in demand for US assets so much as a large contraction in all flows