one chart, one explanation, one elucidation

This is not so good:



And this is why this is not so good:

Japan and China lead flight from the dollar
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 1:09am BST 17/10/2007

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[...]

The US requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.

[...]

Ian Stannard, a Paribas currency analyst, said the data was "extremely negative" for the dollar. "It exceeds the worst fears. It is not just foreigners who are selling US assets. Americans are turning their back as well," he said.

[...]

The Treasury data would have been even worse if it had not been for $60bn of inflows from hedge funds based in Britain and the Caymans, which needed to cover US positions at the height of the credit crunch.

And this is one reason why a dollar collapse, particularly a disorderly dollar collapse, is not as good as many would like to think:

Crude oil futures hit new record high at $89
By Nick Godt
Marketwatch

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The good part, of course, is that the trade deficit will eventually have to sort itself out, one way or another, and a cheap US dollar will help that - at least, as long as the US can keep making stuff anyone cares about. The bigger question is whether this is a one-time event or whether something like it will repeat next month. Even as a one-off, it's ... striking, however.