I don't think this detracts from your thesis at all, but to what extent has declining reserves/GDP ratio been driven by shifting of Chinese FX intervention into the state banks / swaps market (Which won't show up as reserves)?
Very hard to track that... but I find it hard to believe that reserves have built much - most companies and retail investors are keen to get their money out of China...
Yeah fair. Have seen some focus on this topic by Brad Setser (e.g. https://www.cfr.org/blog/how-hide-your-foreign-exchange-reserves-users-guide). But agreed on your broader point nonetheless - if we see the past decades' regime as essentially a global imbalance regime, with the resolution of those imbalances we should expect to see international capital flow contraction (regardless if that contraction comes from official reserve accumulation or from state bank/private flows). And I think it's arguable that US asset prices have been the primary global beneficiary of that dynamic, so the unwind should bode poorly there (which fits in with the second and third of your main points here) and perhaps bode well for relative asset market performance and/or currencies of the world's premier surplus nations.
I don't think this detracts from your thesis at all, but to what extent has declining reserves/GDP ratio been driven by shifting of Chinese FX intervention into the state banks / swaps market (Which won't show up as reserves)?
Very hard to track that... but I find it hard to believe that reserves have built much - most companies and retail investors are keen to get their money out of China...
Yeah fair. Have seen some focus on this topic by Brad Setser (e.g. https://www.cfr.org/blog/how-hide-your-foreign-exchange-reserves-users-guide). But agreed on your broader point nonetheless - if we see the past decades' regime as essentially a global imbalance regime, with the resolution of those imbalances we should expect to see international capital flow contraction (regardless if that contraction comes from official reserve accumulation or from state bank/private flows). And I think it's arguable that US asset prices have been the primary global beneficiary of that dynamic, so the unwind should bode poorly there (which fits in with the second and third of your main points here) and perhaps bode well for relative asset market performance and/or currencies of the world's premier surplus nations.
When you consider how much debt PE use in acquisitions, the system deleveraging may be understated.
When you have only had inflows for 10 years, the system struggles with outflows...
I think the Fed would agree with you - note they recently slowed down QT.