The selling of America!

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investorzzo's picture
Status: Diamond Member (Offline)
Joined: Nov 7 2008
Posts: 1182
The selling of America!

The rise of sovereign wealth funds (SWF) as new power brokers in the world economy should not be looked at as a singular phenomenon but rather as part of what can be defined a new economic world order. This new order has been enabled by several megatrends which operate in a self-reinforcing manner, among them the meteoric rise of developing Asia, accelerated globalization, the rapid flow of information and the sharp increase in the price of oil by a delta of over $100 per barrel in just six years which has enabled Russia and OPEC members to accumulate unprecedented wealth and elevate themselves to the position of supreme economic powers. Oil-rich countries of OPEC and Russia have more than quadrupled their revenues, raking some $1.2 trillion in revenues last year alone. At $125 a barrel oil they are expected to earn close to $2 trillion in 2008.
In fact, oil would go up to $149 that summer. Luft went on:

SWF are pouring billions into hedge funds, private equity funds, real estate, natural resources and other nodes of the West's economy. No one knows precisely how much money is held by SWFs but it is estimated that they currently own $3.5 trillion in assets, and within one decade they could balloon to $10–15 trillion, equivalent to America's gross domestic product.
Luft's analysis would square with a paper written by the San Francisco branch of the Federal Reserve Bank in 2007, which concluded that "analysts put current sovereign wealth fund assets in the range of $1.5 to 2.5 trillion. This amount is projected to grow sevenfold to $15 trillion in the next ten years, an amount larger than the current global stock of foreign reserves of about $5 trillion."

The San Francisco paper noted that most SWFs avoid anything like full disclosure, and there is little information available about what they may have invested in. One source I know who works at a Middle Eastern SWF explains that this is very much part of their investment strategy.

dshields's picture
Status: Platinum Member (Offline)
Joined: Oct 24 2009
Posts: 599
Re: The selling of America!

This is very serious but I am not exactly sure what to make of it or how it will work out.  Massive amounts of money are moving from the oil consuming nations to the oil producing nations.  It is probably the largest wealth transfer in history.  It is bound to have large long term effects.  I am just not sure what they will be.

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