To suppose large and successive [external] balances to be formed into a debt is to assume an accumulation of debt which is almost equally incredible.
Henry Thornton, Paper Credit, 1805
PDF: Hidden information_FINAL.
Charts: Hidden information_chartpack.
THERE WAS ONCE a time when international macroeconomics was conducted largely through the prism of the central bank’s balance sheet. Absent all but patchy data or guesswork on external current or financial transactions—such as the overall goods and service balance or net lending abroad—changes in central bank reserve assets, typically specie, served as the only real indicator of net flows against the rest of the world—if not, of course, internal drain. Thus, monitoring balance sheets became crucial for investors. Continue reading “Hidden flows: Asset prices and eurosystem balance sheets”