I got to wondering, who is getting all the net cash in the world. What countries. Yeah, we all know about China and Saudi Arabia. But is there something showing all the “comes from” and the “goes to”?
In economic terms, this is called the “current account”. ( It leaves out long term money flows like investments in capital stock, so would reflect that we send money to China for plastic crap and leave out the counter flow of that money to buy our farm land. That is, it shows exactly what I want to know.)
Definition of ‘Current Account’
The difference between a nation’s total exports of goods, services and transfers, and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities.
But normally it is just figured for one year. A bit more looking around found a “Cumulative Current Account” map. How is that money stacking up over time?
Turns out that map is very interesting….
Yes, it is an old map. Only up to 2008. So a good 1/2 decade behind where we are now. Probably still about the same pattern, though.
Down in the description it says it is from 1980 to 2008, so a good 28 years of money flow. It also includes the rather interesting table of the values used to make the map reproduced down below.
Now take just a minute to look at that chart. Other than Venezuela exporting tons of oil, and French Guiana that is technically part of France so ought to be counted as Europe numbers, the rest of “The New World” is current account negative. Australia / New Zealand too.
For Europe, Germany is the big engine. France is a little engine (but in the prior posting we saw that it has turned negative now too, so eventually this ‘cumulative’ will turn). The Nordic countries and Netherlands also are net positive; but the Mediterranean arch, Iberia, and Eastern Europe are in trouble on current accounts. There are clearly two Europes. They can not stand under the same currency and survive without massive cultural and economic upheaval.
Much of Africa is not very strongly one way or the other, but the Oil States stand out as net positive. Similarly in the “Middle East” and western Asia the oils states also stand out as green. But other than Saudi Arabia, not all THAT deep a green. Without massive oil money inflows, those countries would be sunk. Russia is a bit of a surprise. They must sell a lot of oil, gas, and minerals / timber to Europe and China to be that green. The Indonesian oil arch also shows up (though they are gaining in manufactures too). Then there are China, Japan, and Korea as net green / gainers. (North Korea shows up as grey / no data).
The oil countries being green is not much of a surprise to me, but the manufacturing centers of China, Japan, Germany, and Korea are surprisingly positive. I always thought of them as more resource dependent. Also the dismal showing of the UK and Australia / New Zealand are a surprise. Canada too. (One presumes their Oil Bonanza is not yet fully reflected in the cumulative numbers).
All in all, a very illuminating image. Why oil so dominates global thinking. Why being a “mercantilist” is so attractive. Why the EU will not hold together under one currency. (And why a North Euro and a South Euro might work). It even shows why bringing Turkey into the EU would be a major financial problem. Like adding another Spain or Italy.
It is also extraordinarily odd to see Russia and China, the two key elements of the old Communist / Cold War era who were essentially not relevant to global production, dominating and winning the current account race of world trade.
Were it not for the Germanic / Scandinavian arc, Europe would be of little importance financially and the “winners” would be oil states, Russians, and Asian manufacturers.
In the end, I’m left wondering if it is stupid, or crafty, that the Anglo countries have managed to trade paper and ‘financial instruments’ for so much oil and goods. Is there some grand strategy to creatively default on all those promises and end up with the goods for nothing? Or are we just selling our capital stock for a bowl of gruel and mug of beer?
From that same link for the chart, there is this table of the data used. In $Billions of cumulative Current Account Balance.
Cumulative Current Account Balance Country CCAB, bn Japan 2,747.943 China 1,521.887 Germany 1,047.328 Russia 613.978 Switzerland 596.977 Netherlands 523.055 Saudi Arabia 451.337 Norway 444.011 Taiwan 365.121 Kuwait 346.713 Singapore 309.727 United Arab Emirates 257.365 Sweden 232.236 Venezuela 191.734 Hong Kong SAR 188.310 Belgium 186.513 Algeria 159.451 Libya 156.081 Malaysia 145.888 Qatar 145.276 France 111.443 Korea 111.264 Iran, Islamic Republic of 89.331 Finland 85.127 Brunei Darussalam 69.732 Denmark 44.564 Luxembourg 42.328 Angola 33.466 Iraq 26.315 Trinidad and Tobago 24.640 Nigeria 20.751 Oman 19.866 Azerbaijan 19.229 Austria 14.919 Gabon 14.558 Turkmenistan 11.673 Botswana 11.427 Bahrain 10.510 Uzbekistan 7.358 Indonesia 5.690 Namibia 4.519 Timor-Leste, Dem. Rep. of 3.943 Papua New Guinea 3.829 Yemen, Republic of 1.623 Kiribati 0.074 Vanuatu -0.096 Tonga -0.201 Eritrea -0.320 Solomon Islands -0.384 Samoa -0.430 Mongolia -0.505 Bolivia -0.523 Comoros -0.628 São Tomé and Príncipe -0.645 Gambia, The -0.800 Swaziland -0.921 Suriname -0.951 Djibouti -0.963 Guinea-Bissau -1.059 Dominica -1.098 Bhutan -1.139 Liberia -1.150 Haiti -1.370 Cape Verde -1.383 St. Vincent and the Grenadines -1.462 St. Kitts and Nevis -1.481 Nepal -1.562 Belize -1.571 Afghanistan, Rep. of. -1.768 Central African Republic -1.829 Seychelles -1.836 Grenada -1.852 Tajikistan -1.937 Equatorial Guinea -1.959 Kyrgyz Republic -1.981 Sierra Leone -1.985 Syrian Arab Republic -2.079 Burundi -2.104 Maldives -2.163 Antigua and Barbuda -2.220 Barbados -2.245 St. Lucia -2.414 Mauritius -2.476 Togo -2.980 Cambodia -3.377 Lesotho -3.396 Fiji -3.637 Paraguay -3.678 Congo, Republic -3.729 Montenegro -3.746 Rwanda -3.782 Guyana -3.799 Macedonia, Former Yugoslav Republic of -4.094 Malawi -4.110 Moldova -4.251 Mauritania -4.376 Malta -4.520 Niger -4.580 Mali -4.666 Armenia -4.712 Guinea -4.789 Egypt -4.936 Benin -5.111 Lao People\'s Democratic Republic -5.322 Myanmar -5.981 Albania -6.005 Uganda -6.009 Zimbabwe -6.476 Burkina Faso -6.663 Uruguay -6.933 Cameroon -6.995 Ukraine -7.381 Slovenia -7.412 El Salvador -7.723 Chad -9.263 Ethiopia -9.296 Ecuador -9.435 Bahamas, The -9.610 Georgia -10.373 Honduras -10.519 Madagascar -10.547 Kenya -10.721 Bangladesh -10.805 Zambia -10.846 Côte d\'Ivoire -11.475 Morocco -11.552 Panama -11.614 Kazakhstan -11.712 Jordan -11.714 Congo, Democratic Republic of -11.894 Israel -11.943 Philippines -12.597 Senegal -12.791 Ghana -13.439 Bosnia and Herzegovina -14.037 Jamaica -14.095 Cyprus -15.262 Belarus -15.527 Dominican Repub -15.594 Tanzania -15.639 Estonia -15.963 Mozambique -16.335 Costa Rica -17.266 Nicaragua -19.224 Thailand -19.586 Sri Lanka -20.541 Tunisia -20.623 Guatemala -21.948 Iceland -21.983 Chile -22.794 Latvia -23.392 Lithuania -25.820 Serbia -26.927 Croatia -30.039 Slovak Republic -34.588 Vietnam -34.599 Bulgaria -41.185 Peru -41.389 Ireland -46.067 Czech Republic -47.131 Pakistan -50.424 Lebanon -51.530 Sudan -53.294 Colombia -53.379 Canada -56.757 South Africa -69.912 Argentina -72.486 Romania -89.819 Hungary -91.720 New Zealand -95.316 India -137.796 Poland -182.901 Portugal -187.217 Turkey -192.089 Brazil -220.506 Greece -249.371 Italy -262.901 Mexico -263.667 Australia -529.031 United Kingdom -695.155 Spain -773.443 USA -7,335.869
Now the most startling number, bar none, is that last one. Those numbers are in Billions. The USA has had 7.3 Trillion dollars of cumulative current account outflows. It covers the entire top 6 and most of Saudi Arabia in #7 position, net inflow countries.
Totalling 7.498 vs -7.335 for the USA.
Also of interest is the country list just above the USA. Spain, UK, Australia and then Mexico, Italy, and Greece. Brazil and Turkey stuck in between them and Portugal.
Kind of makes you go “Hmmmmmm….”
Yes, things need to be adjusted for population size and GDP. But just on the face of it, it’s pretty clear that even with Oil Exports Mexico is spending into the ground. (Though one wonders if drug money inflows are accounted…) The UK has clearly been liquidating for years, and one wonders what Australia has been spending on, what with all those mineral and grain exports. Greece is no surprise, but Brazil? The economic miracle of the ’80s and 90s? Turkey too?
At the top end it is surprising to see that the top three are all manufacturing export countries. Japan leading China (all those cars and TVs/Stereos from the ’80s and 90s?) and then Germany. Even Russia, Switzerland and the Netherlands beat out Saudi Arabia?
I can only presume that a lot of ‘current cash’ flows to Swiss banks. But the Netherlands? What in the world are they selling? I suppose the Dutch are just doing a lot of trading, as they have always done.
At any rate, it’s an interesting picture that explains much in terms of who has the money, who is spending it, and who owns whom.
Looking forward, the implication is that either the heavily negative countries “creatively default” on those long gone purchases via degrading the cumulative counter flow of ‘obligations’, or we simply sell out to those green countries and call it a day… It is also pretty clear that between this long standing “consumption to excess” and our present massive deficit spend at the Federal and other governmental levels; the USA is entirely and completely unsustainable.
Neither at the level of our government, nor at the level of our collective consumption of global goods. We’re all looking to retire (as boomers) and continue consuming at the same unbalanced rate of the prior 28 years; but have nothing much to trade in return for those goods. So far we’ve done it by trading paper ( global reserve currency boat loads of cash, Treasury paper, deeds to stuff) but with the recent collapse of paper assets in real estate, and The Fed making treasuries unattractive, and inflation making the $US less valuable as a reserve currency… Well, I’m just not seeing where the next $7 Trillion of empty promises are going to be floated into the world… And make no mistake about it. Unlike The Fed buying US Treasuries, for current accounts, someone in another country has to accept a promise to pay “someday” or an investment vehicle to fund the ‘buy’.
It looks to me like “Something’s gotta give”, and it won’t be pretty.
No wonder all the politicians in D.C. of all stripes keep doing a frantic kick the can.
“The USA – Ten Spains and deeper in debt”