OP-ED: "Sovereign Wealth to the Rescue: Massive global reserves will chase the bears back to their dens," by Michael Pettis, Wall Street Journal, 9 August 2007, p. A12.
The basic argument is unassailable, based on history: when there's excess liquidity in the global market, globalization expands. More money goes to the edges and seams--simple as that.
Key points in history cited:
-->new joint-stock banks in 1860s
-->gold accumulation in US in 1920s
-->recycling of petrodollars in 1970s.
Each time a latter expansive period ensues.
SWFs, then, are just the global economy's latest trick to keep itself liquid. Money that would otherwise be taken off the table is returned to that table for further play.
That's good for them, for us, and everyone currently poor, because the cheaper the money, the easier the investments, and the easier the investments . . . well, then you're well up my "ten commandments" food chain.
This has been my take on SWFs all along. Just waiting for the right person to pen this op-ed.
But everything I've said previously about needing new rule sets still holds. Expect problems, expect a cycle of sorts, expect some disaster, and expect some rules.
Normal stuff, but the key thing is keeping the money on the table.
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