the ownership of the investment claims that derive from trade is distinct from the initial trade. securities trade in global markets. 1/

so, China can (and i think has) sell US dollar claims for Euro claims, as it grows concerned about sanctions, even as it continues to encourage issuance of USD claims through trade. 2/

i’m not sure whether we care too much about who holds our negative NIIP. we might. but trying to regulate bilateral trade balances wouldn’t address it, at least not without a bunch of other capital controls. 3/

but overall balance is sufficient to reduce the likelihood our negative NIIP continues to grow. /fin