Maybe it is a little bit late to post in this thread. However I cannot believe this absurd logic. They invest the foreign reserve, which CANNOT be used at home. I think it is quite obvious.

And right now, most developed democratic governments are busy bailing out their own troubled credit markets and they don’t have the money to recapitalize large US banks or broker-dealers NOW. The NOT SO democratic governments are free of credit crunch problems and suffered from the excess liquidity. They need higher return for their FX reserve.

Do you imply that the democracy create the credit crisis? I do not see any not-democratic governments having this credit crisis.

Written by CL on 2007-12-23 18:22:56

CL, it’s probably more of a source protection problem than a brit press problem, c’mon Bloomberg has an interesting tendency (previously unthinkable) to cite /headline articles as person/people say . who? out of the 6 billion on this earth?

Brad, oh dear, it’s turned out to be quite a winter of discontent for you huh? But honestly, the question that bugs the mind is , given the huge funds and the management involved, would it complicate terrorism funding and money laundering issues?

Other than on a by definition ‘basis’, there may no longer be such things as national economies but instead just different corners of an uneven and combined global in which the ‘pushing around’ is never one-sided but reciprocal and multi-layered (to include the largest transnational, actually anational, firms and their demonstrated abilities to play govt against govt). IOW, we still think and measure in terms of nicely bounded national economies even as these have become ever more interpenetrated, which is somewhat more than simple interdependence and from which perspective rising economic nationalisms make more sense.

emmanuel — i am not sure limited investment opportunities abroad transfer funds from private to public (or government) hands. in the oil-exporting economies, the problem is rather than the funds never go from government to private hands to begin with; lots of revenue goes from the national oil company to the sov. fund (if not to the ruling family). in china, the core problem is that private demand to move money out of china (setting aside the desire to buy chearp Chinese companies listed on HK) collapsed as the current account surplus increased — china has loosened restrictions on outflows, but it less money (private money) wants to leave china now than before …

One wonders what non-reserve foreign assets held by a monetary agency can be!

Regarding your comments on the previous topic: maybe the topic was a little esoteric, but people know what your expertise is, and they can take it or leave it (if you want to encourage the uninitiated to take more interest, short and well-signposted helps). Personally, I don’t think it matters much who you support politically or who funds RGE, if you offer evidence, relevant and unabusive comments are not deleted and your own mind is not closed. I certainly find this blog informative, and useful for developing ideas and occasionally for seeking information. Thanks for doing it.

Happy Christmas to you and yours.

(1) I personally do not think it is an accident the countries that have moved most rapidly to create sovereign wealth funds generally have not been democracies.

Perhaps more limited outward investment opportunities for citizens in less open countries transfers the pool of investible funds from private to government hands.(I am reluctant to use the word “public” instead of “government” since these two entities are not identical in these countries.) I see an academic paper somewhere in here…

(2) The question to me is, “why now?” It certainly isn’t the most opportune time to come up with an SWF as they are attracting more protectionist scrutiny nowadays from the West masquerading as “security concerns” with the CFIUS and whatnot. Heaven knows KSA has been rolling in the dough for decades. Rock the cash-bah, eh?