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."


Middle American revolt

killed amnesty
for the 12 million illegal aliens has

buried the idea

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

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.


, with its $1.2 trillion in reserves steadily

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

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

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."
that shake capitalist logic
, Financial Times,
July 29, 2007, By Lawrence Summers]

Is it a good idea
to give the boys in Beijing part ownership of Western
banking institutions and the information they contain?


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

Yes, indeed, we
are witnessing how empires end.



Patrick J. Buchanan

no introduction
readers; his book

State of Emergency: The Third World Invasion and
Conquest of America

can be ordered from