Remittances as a Secret Sovereign Wealth Fund

In a stylized-but-good-enough model of global capital flows, there are three things people can do with their money: they can consume, they can directly or indirectly invest in real assets at home, or they can buy financial claims abroad.

This framework vastly oversimplifies things, but it’s a helpful way to think about every country’s economic model. China, for example, leans heavily towards investment — gross fixed capital formation is 43% of their GDP, compared to 20% in the US. Historically, they invested heavily in financial claims, particularly US…