Another BRIC in the Wall

Brazil, Russia, India, and China (the BRIC countries) are piling up huge reserves of American currency. Brad DeLong links to Brad Setser and has some quotes:

As Felix notes, I am reserve-obsessed. For good reason, I would argue. Right now, central bank reserve accumulation is driving the global flow of capital. Private markets have been out-gunned.

We now know that the BRIe economies -- Brazil, Russia and India -- added $200b to their reserves in the first half of the year. Close to $199b to be exact. Russia accounted for $102b of the increase, Brazil chipped in $61.5 and India added another $36b. A tiny bit of that was valuation gains; most of it was real. $200b -- $400b annualized -- is a phenomenal sum.

We don't yet know how many reserves the BRICs added in the first half of the year because we don't yet know how much China added to its already very large stock of reserves. We do know it added $135b in q1 -- and reportedly another $45b in April, but that hasn't been confirmed.

He has a lot more interesting stuff, but the part that interests me the most is what happens when all these countries stop lending us money cheap.

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