We ended last week with a clear sign that global “dollars” are in (escalating) shortage. I would write “again” with that sentence but there is every indication that said shortage never really ended. It's not like last year's “reflation” was a switch from insufficient supply to sufficient, rather it was a relative change to a degree that isn't easily established – and may not have been all that much to begin with (economic stats sure look that way).

The latest Treasury International Capital (TIC) estimates for the month of October 2017 demonstrate that distinction very well. The official side, where foreign central banks and other official accounts operate, is still “selling” UST's and other US$ assets at a serious rate in 2017. October was no different. What's changed is that they aren't steadily selling as much as they were during the “rising dollar” of mid-2014 to 2016.

It indicates a serious funding gap this late into a year where conditions were expected to be if not normal than at least moving unambiguously in that direction. Where TIC truly helps is in more than confirming “dollar” issues as a matter of supply, giving us some needed insight into distribution (and redistribution).

If we look at China, for example, it appears as if the Chinese have nearly solved their imbalance. Being forced to dump nearly $200 billion in UST's in just five months starting in July 2016 through last November (coincident to further CNY “devaluation”), TIC figures show China gaining $140 billion of them back March through September (coincident to CNY's suspiciously remarkable recovery).

The Chinese, as does everyone else, have many pockets including those able to channel significant “dollars.” One of them is stitched into Euroclear (the big European derivatives clearinghouse) residing in Belgium. If we add Belgium to China's holdings over the past few years, the gap is revealed as significantly larger (as well as matching almost perfectly CNY's “rising dollar” history).