The weak dollar has spurred foreign investment in the US, highlighting the United States' increasing dependence on foreign capital. The increase in foreign direct investment has also prompted concerns over the sale of key US businesses and other critical infrastructure such as ports, power plants, and telecommunications networks.
The sale of several high profile properties, to investors from Europe and the Middle East, have made headlines in recent weeks. The Abu Dhabi Investment Council, a sovereign wealth fund based in the United Arab Emirates, is in negotiations to buy a 75 percent stake in Manhattan's Chrysler Building. The deal is estimated to be worth about 800 million dollars. It follows last month's sale of the GM Building and three other properties for approximately 4 billion dollars to a group of investors from Kuwait and Qatar. Also, a European firm has acquired a majority share in New York's famous Flatiron Building, the historic structure known for its triangular shape.
Foreign buyers poured almost 55 billion dollars into US commercial real estate last year - that's about double the amount of 2006. High profile investments, such as the sale of the Chrysler Building, have brought attention to the rise in foreign investment. Direct foreign investment in US businesses reached about 280 billion dollars last year – making 2007 the second highest year on record.
In recent years the value of the US dollar has dropped significantly, inflation has increased, consumer debt has reached an all-time high, and the US housing bubble has burst. Thus opening the door for foreign investors to snatch up US interests at bargain prices. Foreign investors from Europe, China, and oil-producing nations in the Middle East are taking advantage of the United States financial woes. However the influx of foreign capital has raised some red flags.
According to World Net Daily, "the US Department of Commerce's Bureau of Economic Affairs has announced that it will stop publishing a key report tracking foreign investment data... The BEA's decision comes at a time when public and congressional concerns have increased over the acquisition of US assets by foreign investors... Sovereign wealth funds in six Persian Gulf countries, including Kuwait, the United Arab Emirates and Qatar, have now amassed 1.7 trillion dollars, positioning them for attempts to control major banks and securities firms in the United States... Already Middle Eastern investors have acquired 19.9 percent of Nasdaq, the second largest stock exchange in the United States."
For many, the Nasdaq deal seemed eerily reminiscent of the politically disastrous Dubai ports deal. You may recall, in 2006, controversy erupted over the proposed sale of six US seaports to Dubai Ports World, which is controlled by the government of the United Arab Emirates. If it had been allowed to go through, the sale would have placed US ports in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia under the control of an Arab nation, a nation that could be linked to Islamic terrorism.
US Treasury Secretary Hank Paulson recently raised eyebrows when he met with leaders from Saudi Arabia, Qatar and the United Arab Emirates. Paulson's visit to the Middle East was meant to encourage foreign investment in the US. Paulson told Arab investors that US government regulations and safeguards shouldn't discourage investment and that the Treasury Department had no intention of taking a heavy handed approach when reviewing such deals. Paulson said that, "As we seek to open new markets abroad, America will keep our markets open at home to investment from private firms and from sovereign wealth funds. We reject measures that would isolate us from the world economy…" Paulson's comments come at a time when many would like to see us disentangle ourselves from the Middle East and end our dependence on foreign oil. Yet in the past two years the number of acquisitions by Middle Eastern investors rose by more than 100 percent.
The acquisition of US interests by sovereign wealth funds has become something of a hot topic in recent years. Sovereign wealth funds are essentially investment funds controlled by governments that have a surplus of cash. Nations such as the United Arab Emirates, Kuwait, Singapore, China and Russia have invested about 3 trillion dollars in sovereign wealth funds. Some economists estimate that amount will reach 12 trillion dollars within 10 years.
Earlier this year the Abu Dhabi Investment Authority invested 7.5 billion dollars in Citigroup, the nation's largest bank. The Abu Dhabi Investment Authority is the world's single largest sovereign wealth fund. It has been described by the New York Times as "secretive" and "publicity-shy" but in recent years it has taken "steps to leverage its size and influence."
Some lawmakers and economists fear that sovereign wealth funds lack transparency and may compromise national security by buying into strategic firms or sectors. Some members of congress have demanded closer scrutiny of these firms. They are concerned that, by purchasing strategic assets, the governments that control these funds could exert political leverage on Western companies and governments. For example, a Chinese investment firm with close ties to China's communist government recently attempted to purchase a stake in 3Com, a firm that makes computer network security software for the Pentagon. The bid raised security concerns, especially in light of recent accusations that the Chinese government hacked into the computers of two US congressmen.
The rise of sovereign wealth funds is just one example of how the global economy is changing. The balance of power is shifting from the West to up-and-coming nations like China, India, and the oil-rich Middle East. It is also a sign of the further globalization of the world economy. To learn more about this topic, click on the links below.
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"If there is a decay of conscience, the pulpit is responsible for it. If the public press lacks moral discernment, the pulpit is responsible for it. If the church is degenerate and worldly, the pulpit is responsible for it. If the world loses its interest in Christianity, the pulpit is responsible for it. If Satan rules in our halls of legislation, the pulpit is responsible for it. If our politics become so corrupt that the very foundations of our government are ready to fall away, the pulpit is responsible for it." famed Nineteenth Century revivalist Charles G. Finney - When Finney came to a town where the churches were closed and had many bars; after he preached there for several weeks the bars were closed and the churches were now open. Lou Click here to reply to this post
America the Harlot
Posted On: 06/27/08 03:10:33 PM
Age 50, MS
Everyone seems to know why we are in the predicament that we are in, but no one wants to acknowledge the fact that we have been prostituting ourselves for decades, it is those high investors that have sold us out. Including the oil gurus which keep raising the price of oil in this country while giving themselves a hefty bonus check. Why don't we freeze the assets of those who have been making our lives miserables with the oil prices? Why are we allowing foreign investors to buy america one piece of the pie at a time? America will fall, and it will be done from within, because greediness breeds contempt. Click here to reply to this post
Hank Paulson is wrong
Posted On: 06/26/08 07:57:33 AM
Age 61, MO
I have seen almost the same information presented by other writers. Thank you for your research, Mr. Missler. The U.S. government has failed miserably in protecting its citizens. It has allowed uncontrolled immigration, frivolous spending for unnecessary wars, and welfare programs that it can't afford. It has turned financial policy over to a privately owned Federal Reserve Bank, without providing intelligent oversight, that has most recently resulted in a housing crisis devaluation and high inflation, thereby devaluing the dollar. Congress has passed treasonous trade agreements that have cause the loss of many important manufacturing jobs. Instead of encouraging foreign investment in American hard assets by sovereign wealth funds, such investment should be prohibited. Transnational corporations should not be allowed to operate a business in the U.S. In general, any global economic participation must protect the interests of U.S. citizens by putting appropriate tariffs and/or other restrictions in place. It is the responsibility of government, even in a capitalistic economy, to maintain an equal playing field. George Cancilla Click here to reply to this post
A difficult choice
Posted On: 06/26/08 06:36:48 AM
Age 60, CANADA
As a result of America going deeper and deeper into debt during the Bush administration, foreign governments and investors now hold trillions of dollars US dollar denominated paper. Unless they want the value of the debt they hold to vanish, they have no choice but to support the US dollar, and the way to do that is to continue to invest in the U.S.
If we believe that the free market system is the best, we have a very difficult choice. Do we take the protectionist route, and shut the door to foreign investment, leading to possible devaluation and giving the government a level of control that we may not be comfortable with, or do we trust in the open markets that have generated the wealth we now enjoy? Click here to reply to this post
No Choice
Posted On: 06/26/08 09:47:32 PM
Age 61, MO
The U.S. government is already at a level of control that borders on a police state. Devaluation will happen no matter whether protectionist or globalist. At least protectionism will benefit the average American citizen by preventing capital flight. Free enterprise capitalism will work only within sovereign political boundaries. I think we should be aware of that fact by now! George Cancilla Click here to reply to this post
