SPEAKOUT: Worried about too much foreign investment in the U.S.? Don't be
By Mohammed Akacem
Published April 20, 2008 at 12:05 a.m.
Opposition is rapidly growing to investments by giant Sovereign Wealth Funds in the U.S. Even the chairman of the Securities and Exchange Commission, Christopher Cox, has chimed in, voicing concern in testimony before the Senate banking committee regarding increased foreign ownership of U.S. businesses.
Should we be worried? Is the United States about to be overrun by foreign capital and is there a reason for us to be concerned by these new global financial power houses? Not really.
These government-owned investment funds are on the lookout for investment opportunities around the world, given their limited investment outlets at home. They accumulated surpluses over the years through oil sales, in some cases, or (in China's case, for example) current account surpluses through exports.
These funds did not spring up overnight. Singapore's dates back to the 1970s, that of Kuwait to 1953 and one of the United Arab Emirates' funds to the early 1970s. They have been investing around the globe for years and no one seemed to notice until now. Could it be that since oil prices are north of $100 a barrel that we are worried about an onslaught of foreign capital inflow?
Well, worried or not, beggars cannot be choosers. Both of Singapore's funds and that of the UAE came to the rescue of Citigroup and Merrill Lynch with an infusion of capital. The demise of Bear Stearns could usher in another infusion of such capital if this financial earthquake continues to spill over to other institutions.
It is true that these funds are government-owned. It is also true that one could argue that they may not be motivated by the pursuit of profit to the same extent as a private fund would be, as former U.S. Treasury Secretary Larry Summers has already noted. However, the experience of the oldest funds, such as those of Singapore, provides no evidence that these have engaged in politically motivated investments. Singapore, for example, bought Optus, a telecom company, and the shareholders did very well. The company is still in Australia and fears that somehow these funds will pack up and go home are a bit silly. No fund will dump billions of dollars to self-destruct.
The solution to our financial woes is a lot closer to home than we want to admit. For starters, we can at least try to balance the budget instead of relying on the Chinese, Japanese and others to buy our debt. But it is not the sort of solution that is feasible during this election year.
From the right to the left, the candidates are promising the moon. How to fund their promises is yet another mystery. But they remain oblivious to the notion that there is no such thing as a free lunch as long as they attract votes.
Before we rush to enact new rules governing these sovereign funds, perhaps we should remind ourselves that the latest credit crisis that originated in the United States and spilled over to the rest of the world had nothing to do with them.
The late Milton Friedman was once asked if he had any concern that so many foreigners own our government securities. Not at all, he said, if they wish to dump them, we get them at a good price.
In the meantime, the solution to our dependence on foreign capital is in our own hands if we only have the courage to do the right thing.
Mohammed Akacem is a professor of economics at Metropolitan State College of Denver.
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April 20, 2008
9:02 a.m.
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david.miller writes:
Professor Akacem –
Your quote by the late Milton Friedman is true: “… if they wish to dump them (government securities), we get them at a good price.” The problem as I see it is that those “good prices” translate into higher interest rates for the capital markets. Specifically, when the price of bonds goes down, interest rates go up. Since such high interest rates would tend to lessen private sector equity investments (the so called “crowding out effect” by the government competing for funds in the capital markets), economic growth would be curtailed, possibly resulting in a protracted recession. As I see it, the only choice we would have is for the Federal Reserve to monetize a significant portion of the public debt. Of course, this means inflation since more dollars will be chasing the same basket of goods, at least in the short run. Is this necessarily bad? Perhaps not, because in the long run we would essentially be making those dollars we gave to OPEC (or any other foreign concern for that matter) worth less.
You say you want to buy Kansas Mr. Foreign Investor? Well, I’m sorry, but the price of Kansas just went up.
Correct me if I’m wrong, but isn’t this is essentially what we did during the 1970s?
April 20, 2008
9:06 a.m.
Suggest removal
T1anda writes:
I not only worry about foreign investments in this country, I worry about foreigners who are deserting their countries like rats on sinking ships!!
Foreigners come here and expect America to bend over for them and their religious dictates. They reserve their loyalty to the country they left behind. The same country that suffocated their everyday freedoms. They bring their fanatical religions with them and expect America to open her arms in welcome!!
Foreigners come here steal our jobs and identities. Fly their countrys flag over the American flag and reserve their loyalty for the corrupt country they willingly left behind.
Foreigners come here to undermine and attack American citizens in every way possible!!
If we sent all of the foreigners home who have entered this country in the last thirty years, we would most likely see alot less crime, congestion, overcrowding,and hatred/bias that is now beginning to consume this country.
The rats have been coming to our home to roost!!
If you think the above is racist remember:
Who calls non-Muslims Infidels???
Who calls white American's Gringo's???
Who sends its poisonous products into this country??
I could go on and on!!!
Not racist! REALIST!!
April 20, 2008
9:21 a.m.
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david.miller writes:
T1anda -
Try, if you can, to stay on point. Akacem's piece is about foreign investment, not immigration. They are hardly the same. Save the immigration issue for another day.
April 20, 2008
4:31 p.m.
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STOPUSAGiveaway writes:
A M A Z I N G some A R A B Prof is safe in the USA telling us "not to worry" when our USA sovereignty that we the people's ancestry has lived and died and been systematically sacrificed for all over Planet Earth.....
Prof Akacem wouldn't even have a job if it were not for the sstematic disposal of US TROOPS around the world...
PROF AKACEM---Y O U insult me...
Y O U insult my father...
Y O U insult my brothers
Y O U insult my neighbors
Y O U insult my community, my nation; my
Y O U insult my S O V E R E I G N T Y--what's left of it.....what hasn't been sued, removed, stepped on or discarged or overrun by ILLEGALS, TERRORISTS, TRAITORS from Within.
Y O U insult Denver the heritage of a family member where they pioneered
Y O U insult my dead nephew B E H E A D E D
by A R A B S......while you are safe in the USA showing no concern for the region from whence you came.
We the people are supposed to just lay back and be S T U P I D and then believe Y O U
Do Unto Others.....................
One Nation Under GOD
April 20, 2008
8:05 p.m.
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david.miller writes:
STOPUSAGiveaway
I believe you insult America if you are unable to directly address the issues Professor Akacem raises. Is it possible for you to get beyond the man's name and begin analyzing his ideas?
April 21, 2008
7:56 a.m.
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T1anda writes:
Foreign investment is just another avenue for countries to influence and invade America. We are total fools when we put ourselves in the position of having to accept foreign capitol!
Of course greed recognizes no bounds!!