Edward Conard

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Why supply-chain snarls still entangle the world

Economist Staff The Economist
Date Posted:
December 21, 2021
Is Database:
Database

Value of merchandise goods exported from China to the US was up 20% two years/year in fall 2021, driven by heightened demand from American consumers.

The value of merchandise goods exported from China to the US increased by 19% in September and October 2021 compared to two years earlier, driven by heightened demand from American consumers. This surge has kept shipping rates elevated, with benchmark spot rates between China and the US west coast at $15,000 per feu, ten times pre-pandemic levels. The high demand has also led to a shortage of vessels, pushing costs between China and Europe to record highs. Despite some signs of improvement, such as fewer ships waiting at US ports, the real queue remains over 100 ships due to changes in queuing systems. Relief from congestion is not expected soon, with disruptions likely lasting through 2022. As a result, long-term contract rates for container traffic are expected to rise, impacting businesses reliant on shipping.

"... The value of merchandise goods exported from China to America was 5% greater in the first six months of 2021 compared with 2019, before the pandemic. In September and October it was 19% higher than two years earlier. The result is that shipping rates are not coming back to earth. A set of benchmark spot rates from Freightos, a digital freight marketplace, between China and America’s west coast are below a recent peak. But at around $15,000 per feu (40-foot equivalent unit), they are ten times pre-pandemic levels (see chart 1). The outsize appetite for goods in America has had a knock-on effect elsewhere. A shortage of vessels, drawn by high rates to the trans pacific routes, has pushed the cost of sending boxes between China and Europe to record levels. That raises costs for businesses that rely on shipping firms. Small items such as smartphones or sports shoes can be packed by the tens of thousands into a container. But a rough estimate of the average value of goods in a box travelling between China and America is around $50,000. Another $15,000 makes a significant difference....The big question is how much new capacity is in the offing. As world trade boomed in the years before the financial crisis of 2007-09, order books were roughly equivalent to 60% of the existing fleet. They now stand at a little over 20%. Restraint is due in part to uncertainty over the technology needed to make vessels which have a 25-year lifespan compliant with tougher carbon-emissions rules that the industry is expecting. Still, capital discipline may have its limits. Orders have begun to swell again (see chart 2). But it will take two to three years before ships ordered today start rolling down slipways. The era of pricey shipping could well last for another Christmas or two...."

Economist Staff, "Why supply-chain snarls still entangle the world,"The Economist, December 16, 2021, https://www.economist.com/business/a-return-to-container-shippings-pre-pandemic-days-is-a-long-way-off/21806844

Why supply-chain snarls still entangle the world

Father christmas and the global container-shipping industry have similar objectives, though the timescales differ. Santa’s world-spanning logistics operation aims to deliver presents all in one night. Shipping firms step theirs up around September to ensure that gifts and other seasonal goods join a vast global supply chain. But a system that usually operates unnoticed (and unremarked upon) is still in chaos. For months a covid-induced maelstrom of delays and sky-high shipping rates has left goods lingering at sea and shop shelves bare around the world. Politicians insist that the snarls will disappear. But survey the horizon and there is little sign of smoother sailing.

The pandemic has hit shipping firms’ operations along the supply chain. Labour shortages have been worsened by workers forced to isolate. China’s zero-tolerance measures have closed port terminals after the discovery of one or two covid-19 cases. The spread there of the new Omicron variant makes more closures likely. But the most significant impact of the pandemic has been to ignite demand for goods from self-isolating shoppers, particularly Americans eager to buy Chinese products using stimulus money. The value of merchandise goods exported from China to America was 5% greater in the first six months of 2021 compared with 2019, before the pandemic. In September and October it was 19% higher than two years earlier.

Why supply-chain snarls still entangle the world: Extended Excerpt Image 1


The result is that shipping rates are not coming back to earth. A set of benchmark spot rates from Freightos, a digital freight marketplace, between China and America’s west coast are below a recent peak. But at around $15,000 per feu (40-foot equivalent unit), they are ten times pre-pandemic levels (see chart 1). The outsize appetite for goods in America has had a knock-on effect elsewhere. A shortage of vessels, drawn by high rates to the trans pacific routes, has pushed the cost of sending boxes between China and Europe to record levels. That raises costs for businesses that rely on shipping firms. Small items such as smartphones or sports shoes can be packed by the tens of thousands into a container. But a rough estimate of the average value of goods in a box travelling between China and America is around $50,000. Another $15,000 makes a significant difference.

To eye-watering costs add lengthy delays. Ports, unused to such volumes of traffic, face long queues of ships waiting weeks to unload. In a system already stretched to the limit by lack of lorry drivers and warehouse space, up to 15% of the global container fleet is currently sitting at anchor outside the world’s ports.

Apparent signs of improvement are illusory. A widely watched indicator, the armada waiting to offload goods at the twin ports of Los Angeles and Long Beach, America’s main entry points for Chinese imports, now numbers some 30-40 vessels, down from 70-80 in October. However, that is mostly because a recent change to the queuing system means that ships are now asked to wait far out at sea (some even linger off the Chinese coast). The real queue is over 100 ships.

Relief from this congestion does not look imminent, and the longer it builds the longer it will take to unwind. Most pundits see little hope of improvement until after Chinese new year in February. Disruptions may last all of 2022. Though rates may have hit a peak, they are unlikely to fall much in the next six months and are set to remain elevated into 2023, thinks Lars Jensen of Vespucci Maritime, a consultancy. Only then will new vessels ordered in response to high rates start to hit the waves.

Even if spot rates have peaked most customers will face higher bills in 2022. The long-term contracts that govern the bulk of container traffic are currently far lower than spot rates—perhaps $2,500-3,000 per feu between China and America. But as David Kerstens of Jefferies, a bank, points out, spot rates inform contract rates. In 2021 two-thirds of the contracts signed by Maersk, the world’s biggest container-shipping firm, which controls a fifth of the global market, have been long-term ones. As Maersk’s contracts and those of its rivals roll over, the rates could double. And with customers more concerned about securing scarce capacity than haggling over price, some are signing contracts for two years rather than one.

Fears that a trend for “near-shoring” might hit demand seem unwarranted for now. Soren Skou, boss of Maersk, sees little evidence of it so far. Many firms that source supplies from China are having doubts about relying on one country. A “China plus one” policy of adding a supplier in another part of Asia, such as Vietnam or Thailand, needs more ships to transport these goods directly to America or to giant Chinese hub ports for their onward trip.

The industry’s response to the crunch reflects changes to its structure that predate covid-19. In the words of Rahul Kapoor of the Journal of Commerce, a sectoral must-read, “The era of cheap shipping is behind us.” Shifting goods around the world has been inexpensive because the response to high rates has historically been a frenzy of orders. That, in turn, has led to a flood of vessels that arrive just as economic conditions worsen and trade slows.

But bloody price wars over market share may be gone for good. Since 2016, when a previous ship-ordering binge collided with slowing trade, collapsing rates and big losses, the industry has consolidated—20 big firms have become seven bigger ones in three global alliances. This has helped them manage capacity more ruthlessly. As a result, the cyclical industry may suffer shallower and shorter downturns, says Parash Jain of hsbc, another bank.

The strange result of the pandemic is that the industry is awash with cash. Simon Heaney of Drewry, a consultancy, says that profits could reach $200bn in 2021 and $150bn in 2022, an unimaginable bonanza beside the cumulative total of around $110bn for the previous 20 years. As well as returning cash to shareholders, Maersk may acquire more firms in e-commerce fulfilment and air-freight as part of its effort to build an end-to-end logistics business that ferries goods by sea, land and air, taking on dhl and FedEx. Other big container-shipping companies such as China’s cosco and France’s cma-cgm are doing the same.

Why supply-chain snarls still entangle the world: Extended Excerpt Image 2


The big question is how much new capacity is in the offing. As world trade boomed in the years before the financial crisis of 2007-09, order books were roughly equivalent to 60% of the existing fleet. They now stand at a little over 20%. Restraint is due in part to uncertainty over the technology needed to make vessels which have a 25-year lifespan compliant with tougher carbon-emissions rules that the industry is expecting. Still, capital discipline may have its limits. Orders have begun to swell again (see chart 2). But it will take two to three years before ships ordered today start rolling down slipways. The era of pricey shipping could well last for another Christmas or two.

Ed Comment: A 20% increase in volume is extraordinary. I think it stems from saving being sold to offshore savers.

  • Savings Glut/Trade Deficit
  • GDP
    • Growth
    • Trade (not deficits)
Previous articleDecember 9, 2021The pollsters WaterlooPew finds 93% of national polls in 2020 overstated Democratic candidates’ support, a trend also seen in 2016 with 88% of polls. @KarlynBowmanNext articleDecember 21, 2021Has the pandemic shown inflation to be a fiscal phenomenon?Western Central Banks have bought more than $9T in assets; during the same period, American commercial banks deposits +~$4.5T from $13.5T in early 2020 to ~ $18T today.
Showing 114 database articles primarily about Savings Glut/Trade Deficit

How To Buy A Trade Surplus

Joseph Gagnon and Nishtha Agrawal Peterson Institute For International Economics
Date Posted:
July 29, 2026
Is Database:
Database
Is Important:
Important

Using annual data for 146 countries from 1985 – 2024, Gagnon and Agrawal find that a $1 increase in a country’s cyclically adjusted fiscal deficit is associated with a 22–38¢ increase in its current-account deficit, with most of the estimates ~30¢.

Table 1 presents regression results. The evidence strongly suggests that governments can buy current account surpluses. Raising the fiscal balance by $1 tends to raise the current account by $0.30 [Table 1, first row]. Issuing $1 of domestic currency debt to buy foreign-currency assets (foreign exchange intervention) raises the current account anywhere from $0.20 to $1.00, with a value around $0.50 to $0.60 most plausible [Rows 2 though 5]. NOF is Net Official Flows, and NOS is the stock of net official foreign assets. The most powerful policy, as exemplified by Norway and Singapore, is to run a fiscal surplus and invest the proceeds in foreign-currency assets. In that case, $1 buys a current account surplus of around $0.80 or so. The results are supported by annual panel regressions of current accounts and cross-country stock regressions of cumulated current accounts or stocks of net foreign assets. The estimated effects in the panel regressions may be biased down slightly by incomplete modeling of lagged effects.

Related Articles:

  • Understanding Global Imbalances — Four economies—the United States, China, Germany, and Japan—account for roughly two-thirds of global imbalances, with current account surpluses and deficits now lasting twice as long as they did in the 1980s. Persistent imbalances have accumulated into large foreign asset and liability positions, with the United States holding net foreign liabilities
  • The U.S. Trade Deficit: Myths and Realities — Obstfeld @PIIE argues that current account deficits have not been forcibly “imposed” on the US from abroad since 2002. Rejecting Pettis’ tax on capital flows…
  • The Dangerous Triumph Of Neo-Mercantilism — China’s refusal to address its excess saving will likely fracture the global economy, Wolf argues. He suggests reviving Keynes’ attempt, rejected by the US at…
  • Savings Glut/Trade Deficit
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Honey, Who Shrunk the U.S. Income Surplus?

AI Summary. Foreign investors hold $69tn in U.S. assets against $41tn held abroad, creating a $15tn net liability gap that subtracts $150bn from U.S. investment income for every 1% rise in interest rates — 50% more sensitive than five years ago.

Matthew Higgins and Thomas Klitgaard Liberty Street Economics
Date Posted:
May 19, 2026
Is Database:
Database

The US net international investment position worsened by about $16tn between 2019 and 2025, driven by roughly $5.5tn in net inflows and $10tn in valuation losses, as higher rates hit a larger net liability stock, raising interest rate-sensitivity.

Is rising interest rates widening America's foreign investment income gap?

Core argument: The $28tn gap between foreign holdings of U.S. assets ($69tn) and U.S. foreign holdings ($41tn) drives mounting income payments abroad.

Foreign holdings of U.S. financial assets are immense, with official estimates putting their current market value at $69 trillion. U.S. holdings of foreign assets are also impressive but much smaller, at $41 trillion. The shortfall in U.S. foreign assets relative to foreign liabilities has been mounting for decades. Yet U.S. investment income receipts—in profits, dividends, and interest—comfortably exceeded income payments until recently. Payments on U.S. assets owned by foreign investors represent a servicing burden for the U.S. economy. Profits, dividends, and interest payments that would otherwise accrue to domestic investors instead flow abroad. Given the need to sell U.S. assets to finance ongoing trade deficits, this servicing burden seems likely to mount. The related buildup in the U.S. net liability position in interest-bearing assets will also make the income balance more sensitive to swings in interest rates. This increased sensitivity is already in evidence. At present, with the asset-liability gap at -$15 trillion, a 1 percentage point increase in U.S. and foreign interest rates would subtract $150 billion from the U.S. net income balance. (A 1pp fall in rates would result in a similar improvement.) Only five years ago, a 1 percentage point rise in rates would have subtracted $100 billion.

Takeaways by Macro Roundup® AI

  1. The $28tn gap between foreign holdings of U.S. assets ($69tn) and U.S. foreign holdings ($41tn) drives mounting income payments abroad.
  2. A 1pp interest rate rise now subtracts $150bn from U.S. net income—50% more than five years ago—as the $15tn net.
  3. Ongoing trade deficits force asset sales to foreign investors, leading to larger servicing burdens and greater exposure to interest rate.

Related Articles:

  • Understanding Global Imbalances — Four economies—the United States, China, Germany, and Japan—account for roughly two-thirds of global imbalances, with current account surpluses and deficits now lasting twice as long as they did in the 1980s. Persistent imbalances have accumulated into large foreign asset and liability positions, with the United States holding net foreign liabilities
  • Tariffs and “International Payments Problems” — The worsening of the US net international investment position – from -20% of US GDP in 2010, to -53% pre-pandemic, and to -89% as of the end of 2025Q3…
  • Foreigners Rebuff ‘Sell America’ and Buy a Net $1.6 Trillion in Assets — Foreign investors bought a net $1.55T of American long-term US financial assets in 2025, including $720B of net equity purchases and $409B in Treasury notes…
  • Savings Glut/Trade Deficit
  • Monetary Policy

Don't Blame America's Current Account Deficit On the Dollar

AI Summary. The United States current account deficit is not required to supply the world with dollars, because foreign entities can acquire dollar assets by selling financial assets to Americans rather than goods, leaving the current account balance unchanged.

Maurice Obstfeld Peterson Institute for International Economics
Date Posted:
April 14, 2026
Is Database:
Database

Noting the minimal relationship between official liabilities and the CA, Obstfeld argues that the reserve currency role of the dollar is not the cause of the trade deficit. He urges reduction in the US fiscal deficit to increase national saving.

Is the current account deficit driven by dollar demand or asset sales?

Core argument: I cannot generate the requested takeaways because the source material contains no quantitative data, numerical findings, or comparative metrics. The.

Critics of the dollar's global role have argued that foreign official dollar purchases (labeled US incurrence of official liabilities in the figure) feed one-for-one into US current account deficits. To illustrate the true loose relationship between these two variables, the figure shows both of them over the 2003–25 period, as percentages of GDP. US net incurrence of liabilities to official holders, reported with a minus sign as in standard balance-of-payments methodology, is usually far too small to mirror the US current account deficit. And since roughly 2014, net official financial inflows have fluctuated around zero as the current account deficit has widened. To be sure, the strong international demand for dollars may make the dollar stronger against foreign currencies than it would be otherwise, [but] while they imply a smaller current account balance, they do not necessarily imply a negative balance and certainly not a rising negative balance, especially when foreign dollar reserve holdings have been shrinking relative to global economic activity (as figure 1 also implies). The euro is the world's second reserve currency, yet the euro area has a current account surplus. Britain had surpluses up until World War I despite issuing the world's premier global currency and hosting its leading financial center. Reducing the US fiscal deficit materially and sustainably is the most important US policy prerequisite for global current account rebalancing.

Takeaways by Macro Roundup® AI

  1. I cannot generate the requested takeaways because the source material contains no quantitative data, numerical findings, or comparative metrics. The.
  2. To produce compliant takeaways, I would need data such as: current account deficit figures, dollar reserve holdings, asset sale volumes.

Related Articles:

  • US Notches One of Its Biggest Annual Trade Gaps Since 1960 — The US trade deficit was $901.5B in 2025, effectively unchanged from 2024 despite the new tariff regime. The US bilateral deficit with China fell to $202B, the…
  • The U.S. Trade Deficit: Myths and Realities — Obstfeld @PIIE argues that current account deficits have not been forcibly “imposed” on the US from abroad since 2002. Rejecting Pettis’ tax on capital flows…
  • Pettis on Obstfeld — Responding to Maurice Obstfeld, @michaelxpettis argues that the chronic US current account deficit reflects deep and open US capital markets, which encourage…
  • Savings Glut/Trade Deficit
  • China
  • Fiscal Policy
    • Fiscal Deficits
  • GDP

Understanding Global Imbalances

AI Summary. Four economies—the United States, China, Germany, and Japan—account for roughly two-thirds of global imbalances, with current account surpluses and deficits now lasting twice as long as they did in the 1980s. Persistent imbalances have accumulated into large foreign asset and liability positions, with the United States holding net foreign liabilities

IMF Staff International Monetary Fund
Date Posted:
April 7, 2026
Is Database:
Database

As of 2024, the US, China, Germany, and Japan accounted for ~2/3 of total global imbalances (the sum of the absolute value of each economy’s current account deficit and surplus). The US CA deficit is between 0.8 and 1% of world GDP.

Core argument: Surplus durations have doubled since the 1980s, accumulating massive foreign asset positions for China, Germany, and Japan.

Four economies—the US, China, Germany, and Japan—account for roughly two-thirds of global imbalances. The US deficit—equivalent to 4% of GDP as of 2024—has been financed by capital inflows and portfolio investors seeking dollar assets. Germany and Japan’s surpluses have been driven by high saving rates, joined by substantial surpluses in China beginning in the 2000s. Oil-exporting countries’ surpluses fluctuate with commodity prices, creating episodic contributions to global imbalances. In earlier decades, surpluses and deficits were more cyclical: countries moved in and out of surplus depending on business cycles, commodity shocks, and exchange rate movements. While there is no standard definition of persistence, the average duration of a deficit or surplus spell roughly doubled since the 1980s. Persistent surpluses over the past two decades have accumulated into very large net foreign asset positions for economies such as China, Germany, and Japan, with each holding net foreign assets equivalent to 3–3.5% of global GDP in 2024. Similarly, persistent deficits have built up into large net liability positions, most notably in the US where the NIIP stands at about -25% of global GDP in 2024, underscoring the central role of the US position in global balances (Figure 6).

Takeaways by Macro Roundup® AI

  1. Surplus durations have doubled since the 1980s, accumulating massive foreign asset positions for China, Germany, and Japan.
  2. Understanding Global Imbalances.
  3. Germany and Japan’s surpluses have been driven by high saving rates, joined by substantial surpluses in China beginning in the.

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  • China
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    • Financial Markets
    • Trade (not deficits)

China’s Cheap Money Is Shaking $9.5 Trillion Global Loan Market

Bloomberg Staff Bloomberg
Date Posted:
March 5, 2026
Is Database:
Database

China’s savings glut and “monetary easing to counter slowing growth” are manifesting themselves in credit expansion overseas, as bankers seek higher yields than they can get at home amidst deflationary pressure.

Chinese banks, flush with low-cost funds, are reshaping parts of the global loan market, underscoring how deflationary pressures in the world’s second-largest economy are increasingly influencing competition with international lenders. Much like US and European manufacturers who have long complained about being undercut by cheaper Chinese rivals, bankers at global institutions now say they’re facing the financial equivalent: being priced out of some of Asia’s most sought-after borrowers as Chinese lenders extend cheaper credit across borders. Enabled by Beijing’s monetary easing to counter slowing growth, Chinese banks are expanding overseas lending amid weakening domestic credit demand. That edge may prove even more significant as the Iran crisis threatens to upend global energy markets, raising the likelihood that major central banks will hold off easing interest rates amid mounting uncertainty.

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Tariffs and "International Payments Problems"

Matt Klein The Overshoot
Date Posted:
March 4, 2026
Is Database:
Database

The worsening of the US net international investment position – from -20% of US GDP in 2010, to -53% pre-pandemic, and to -89% as of the end of 2025Q3 – reflects valuation gains on US stocks relative to stocks in the rest of the world.

Foreigners are accumulating more financial claims on Americans than Americans are accumulating on foreigners across every single category: FDI, stocks, bonds, physical currency, deposits, and loans. Foreign official investors supposedly have been mild sellers of U.S. assets over the past 12 months, but the standard measure does not include state-affiliated institutions that operate on behalf of foreign governments. Meanwhile, the U.S. net international investment position has swung massively over the past few years, from -20% of U.S. GDP in 2010, to -53% of U.S. GDP on the eve of the pandemic to -89% as of the end of 2025Q3. Almost all of that reflects massive valuation gains on U.S. stocks relative to stock markets in the rest of the world. The good news is that actual U.S. indebtedness has not meaningfully increased, and the methods used to assign market values to FDI in the U.S. and abroad make the situation look more extreme than it is. (U.S. FDI assets in Ireland are overwhelmingly big tech and big pharma, for example, but the market value of those assets is imputed based on the performance of the maker of Kerrygold.) The bad news is that, if the current level of the NIIP is unsustainable, the easiest way for it to revert is for U.S. stock prices to fall dramatically.

Related Articles:

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  • Savings Glut/Trade Deficit
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    • Taxation
  • GDP
    • Financial Markets
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