The Institute of International Finance (IIF) calculates that the oil slump has slashed petrodollar flows by $375 billion a year.
Crude exporters were net buyers of $123 billion of foreign bonds and assets in 2013. Last year they were net sellers of $90 billion.
China has also changed sides, becoming a seller late last year as capital flight quickened.
Liquidation of reserves automatically entails monetary tightening within these countries, unless offsetting action is taken. China still has the latitude to do this. Russia is not so lucky, and nor is Brazil. If they cut rates, they risk a further currency slide.
Powerful undercurrents in the world’s financial system are swirling beneath the surface. Some hope that the European Central Bank’s €60bn injection of QE each month will keep the asset boom going. If the Fed raises rates again, it pushes the dollar yet higher. That may matter more in the end especially for emerging countries.
It is possible that the Fed will retreat once again, judging that the world economy is still too fragile to withstand any tightening. The Atlanta Fed’s forecasting model for real GDP growth in the US itself has slowed sharply since mid-February. Now even some other analysts have joined me about warning of a global recession.