$709 billlion in reserve accumulation in 2004

The BIS annual report is out.

Let no one doubt something changed in the global economy, starting in 2002.

1999 global reserve increase: $140 b

2000 global reserve increase: $158 b2001 global reserve increase: $111 b

2002 global reserve increase: $355 b2003 global reserve increase: $620 b (plus $45 b transferred to two state banks in China)

2004 global reserve increase: $709 billion2005 global reserve increase: ?

My bet is close to $600 billion, even without Japan. Mostly in China, Malaysia, Taiwan, India AND the world’s oil exporters. Maybe more if more of the $60 a barrel "oil windfall" shows up in reserves.

Note that the 2003 and 2004 increase includes "valuation gains" as the dollar value of the world’s euro reserves rose. Take out the valuation gains (roughly $70b in 2004) in 2004 and the valuation losses now expected in 2005, and 2004 and 2005 reserve accumulation may not look all that different.

The BIS, unfortunately, did not include a breakdown between the increase in dollar and non-dollar reserves in this year’s annual report. We will have to wait until the IMF releases its annual report in the fall.

It is still pretty clear that the BIS thinks that the US current account deficit is too big, and Asian reserve accumulation is too high -- and neither side is willing to do much to try to preempt possible trouble.