The SWFs Are Coming!
The Iraq war has probably killed the idea of using U.S. troops to intervene in the name of Mr. Bush's "world democratic revolution." The Middle American revolt that killed amnesty for the 12 million illegal aliens has buried the idea of open-borders immigration. Come now the SWFs, which may bring an end to America's folly in her unthinking embrace of global free trade.
What are SWFs? They are Sovereign Wealth Funds—huge capital funds controlled by regimes that are the big new boys on the block in the world of global finance.
How are SWFs created? Primarily from the mammoth trade deficits America has run up. In 2006, America had a merchandise trade deficit of $836 billion and a current account deficit of $857 billion, or 6.5 percent of our entire Gross Domestic Product.
Foreign nations have piled up huge cash reserves. China, at the end of March, had $1.2 trillion; Japan nearly $900 billion; Russia, with oil and gas revenue pouring in, something like $300 billion. The Arab Gulf states also have huge hoards of dollar reserves.
Rather than keep all this cash in U.S. Treasury bonds earning 5 percent a year, these nations are creating SWFs to go after higher rates of return and corporate assets to advance strategic interests.
The United Arab Emirates has $500 billion in SWFs; Norway $400 billion; Singapore and Saudi Arabia $200 billion; and China nearly $200 billion. Total SWF funds worldwide is $2.5 trillion, writes ex-Treasury Secretary Larry Summers, a figure that is expected to double to $5 trillion by 2010, and then double again to $12 trillion by 2015.
The problems these SWFs portend are enormous.
Since the Reagan-Thatcher era, privatization of publicly owned assets has been the trend in the free world. Airlines, railroads, mines, utilities, and telephone and telegraph companies have all been sold off by governments to private investors, who, to make them profitable, have made them efficient.
The SWFs reverse that trend. For these funds are all owned by or answerable to regimes, whose agents can direct these vast funds into assets not to produce maximum income, but maximum strategic benefit to the regime.
Suppose China, with its $1.2 trillion in reserves steadily rising from its soaring trade surpluses, begins to invest, through its SWF, in Boeing, Microsoft, IBM, GE and U.S. companies that build our strategic submarines, stealth bombers, satellites and missiles. Will the United States rope off the industries that build the weapons of our national defense from any ownership by SWFs?
If foreign investors can buy stock in these companies, why not foreign countries through SWFs?
Will we let China invest at all in such assets? What percent will Beijing be permitted to buy? Will SWFs be allowed to buy a controlling interest in a company responsible for weapons of national defense? Will they be allowed to buy controlling stakes in companies responsible for what remains of America's lead in high-tech? Will they be allowed to extract the technology? Who will decide what companies are vital national assets that foreigners, or at least some foreigners, will not be allowed to take over, or even to invest in?
Recall the firestorm over the Dubai Ports deal. Americans did not want Arab sheiks running American ports, but there was no such outcry when the idea of a British firm running them was broached.
The new corporate raiders are going to be a far tougher lot than the old, for this game is going to be about bigger stakes than where one ranks on the Forbes or Fortune list of billionaires.
As Summers writes: "In the last month we have seen government-controlled Chinese entities take the largest external stake ... in Blackstone, a big private equity group that indirectly, through its holdings, is one of the largest employers in the U.S. ... Gazprom, a Russian conglomerate in effect controlled by the Kremlin, has strategic interests in the energy sector of a number of countries, and even a stake in Airbus. Entities controlled by the governments of China and Singapore are offering to take a substantial stake in Barclays, giving it more heft in its effort to pull off the world's largest banking merger with ABN Amro."
Is it a good idea to give the boys in Beijing part ownership of Western banking institutions and the information they contain?
Should Rupert Murdoch retire, and his successors decide to divest some media properties, will China's Sovereign Wealth Fund be allowed to buy shares? One recalls the hysteria in Washington during the Reagan years when it was learned that South Africans might use a front group to buy the Washington Star.
Under free trade, we Americans have seen our jobs, technology, factories and wealth leave these shores for foreign lands. Now, our money is coming back to buy up our companies and our country.
Yes, indeed, we are witnessing how empires end.
COPYRIGHT 2007 CREATORS SYNDICATE INC.
Entries(RSS)
"Under free trade, we Americans have seen our jobs, technology, factories and wealth leave these shores for foreign lands. Now, our money is coming back to buy up our companies and our country.
Yes, indeed, we are witnessing how empires end." -Pat
It doesn't look good, for both geography & free will are fate. What do I mean? Well recently Kissinger & Co., made a secret trip to see Putin after his meeting with Bush. They were looking to muscle him into their wacky game of 'the new world order.' Putin has geography i.e. resources etc. but could have ceded, if for example a Yeltsin, but he used his free will in behalf of his own nation's geography. They were all sent packing. This never made our complicit, hegemonic press to my knowledge, at least not the mainstream, did it?
Our problem in the u.s. is what it has been for the past 100 years now almost, we were coerced behind the scenes away from our own people's i.e. nation's interests into the now obviously wacky new world order scheme which everyone even its proponents realize is now passe.
The big Question is will these quislings essentially who run the show - the dyed in the wool establishmentarians see the writing on the wall which they now do - ok, but nonetheless will they just sell us all out post haste down the tubes, and further line their pockets, or retrench with us as a nation?
To be or not to be - that is today the question... we all must ask ourselves. IF we want to Be - we ALL had better start taking the bull by the horns... That's just one reason I'd go with for example a Barack Obama over a clinton - since he & she are dyed in the wool establishmentarians, for one thing. etc.
"To be or not to be - that is today the question…", but To be what? The answer is slaves thru debt. The average American is headed the way of the average Athenian. My latest posting from Discover Card informed me that a late payment entails an immediate fine of $40 which, along with the balance on the card is now subject to some 29 or so percent interest. At the moment anyway. I do not doubt that it is going up. ATM accounts, which used to deliver funds from your account immediately to an authorized someone else's, can now be depleted immediately by a clever thief, and, if you did not have the foresight to expressly forbid it in writing, will deliver funds that you don't have and increase the debt by a non-funded transfer fee and initiate immediately a loan balance with the banks most obscene interest rate. Capitalism is unmaskiing itself as Usury!
"Capitalism is unmaskiing itself as Usury!" -- Lee
Without disagreeing: My memory of Uncle Ez's mishaps with "Usura" makes me suggest an alternative: How about an older malady, one that made it to St. Gregory the Great's seven Capital Sins: Avaritia, "greed" -- one of the excessive loves of a secondary good. See Aquinas ST II-IIae Q 118 for the
daughters of greed: treachery, fraud, falsehood, perjury, restlessness, violence, insensibility to mercy. See Aristotle: Ethic. iv. 1 for the species: sparing-gives little, tightfisted-gives nothing, skinflints-gives with great reluctance, misers, batton on whoredom (or any illegal gain), usurers, gamblers, despoilers of the dead, robbers.
Then there's that other moral theologian, Fiorello Henry LaGuardia: "nullum gratuitum prandium"; "There ain't no such thing as a free lunch" (TANSTAAFL). See ST II-IIae Q148 for over-indulgence. I don't have time to look up Thomas on prodigality.
Sid, I cannot disagree, but I think, in this case, I'm more correct. Capitalism is simply the other side of the coin from Socialism which is the democratization of envy. I believe we are seeing the reentry of the usury of the Middle Ages when peasants (and rulers for that matter), unfamiliar with and unprepared for demands of compound interest took out loans for immediate wants and were unable to pay them back -- only to be enslaved in their own land. It is interesting to note that the previous Congress with a Republican majority and without Democratic dissent and pressured by the credit card companies and banks amended the laws allowing all these recent increased bank and credit card fees and interest rate increases AND removed credit card debt from the category of debt that a bankruptcy court could release a man from! For all the emphasis on acquisition of knowledge to save us from perdition, no one is "educating" our youths on the dangers of debt -- it would detract from the public school's primary mission of training students for work and consumption.
I do believe we could make progress in understanding these things if we made a distinction that was commonplace to Jeffersonians--- the distinction between wealth creation by labour, productivity, entrepreneurship on the one hand, and wealth extraction by government supported speculation in paper on the other.
"I do believe we could make progress in understanding these things if we made a distinction that was commonplace to Jeffersonians— the distinction between wealth creation by labour, productivity, entrepreneurship on the one hand, and wealth extraction by government supported speculation in paper on the other." -CW
State capitalism (is there any other kind of 'capitalism') is socialism or love and support socially of the rich = richistan (often overnight)... why do you think every failure wants into govt.? They are needed (by richistan) and get included in the 'earmark' one way or another and are made RICH enough, to do it in the first place. I'm hip.
Ladies and gentlemen - that's The SYSTEM. Why aren't you all running for office? You know what they say (accurately) money isn't everything - but it's Almost everything. No?
I'd like to be in govt. I qualify. I'm a failure.
Sorry guys...this was your humor break... with truth as the dressing.
I don't think the Chinese should be allowed to buy shares in our companies unless they open their A shares market to us.