NationStates Jolt Archive


Sovereign Wealth Funds (= governments investing in financial markets)

Neu Leonstein
11-01-2008, 02:37
http://www.economist.com/finance/displaystory.cfm?story_id=9230598
http://www.economist.com/displayStory.cfm?story_id=9556414&fsrc=RSS

Lots of countries are sitting on a lot of cash these days. Anyone who wants to maintain a currency peg needs much more foreign money to keep it going than, say, 30 years ago, because financial flows have become much larger and much quicker.

So many governments figure that they should be doing something worthwhile with the money while it's just sitting there, and have started "sovereign wealth funds". They basically act like hedge- or pension funds, except with less transparency and potentially political motives. Many are predicting that with the credit crunch now the wave of mergers and acquisitions, leveraged buy-outs and so on won't necessarily end because this government money comes in at the right time.

But what do you think about this? Is it a good thing? Would you support a sovereign wealth fund buying a big, well-known company in your country?
Marrakech II
11-01-2008, 03:11
It brings up the discussion of nations using these funds as weapons rather then using armies to inflict damage to an enemy. The US should get on board to help defend itself on the economic battlefield.
Vetalia
11-01-2008, 03:17
I'd rather them use their money productively than waste it slapping up a bunch of useless palaces. Social change is invariably tied to economic growth and development, and without responsible use of these resources there never will be any change in these regimes.
Marrakech II
11-01-2008, 03:28
I'd rather them use their money productively than waste it slapping up a bunch of useless palaces. Social change is invariably tied to economic growth and development, and without responsible use of these resources there never will be any change in these regimes.

Not a bad point but don't you think the real potential is there for use of these funds to damage other nations economies? Maybe I am being overly paranoid.


Edit: Apparently I'm not the only alarmist about this.

http://www.economyincrisis.org/articles/show/1177

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2658402.ece

http://www.huffingtonpost.com/raymond-j-learsy/sovereign-wealth-funds-an_b_70693.html