Content Matters

The lead story on 60 minutes tonight was on sovereign wealth funds, and, in particular, on the recently launched Chinese SWF as Lesley Stahl interviewed the funds' CIO Gao Xiqing.

There was not much new ground broken in the interview, but the fact that the mainstream media is now focusing on the SWFs itself is of interest. Throughout history, every society has looked to cast blame for their own ills on a scapegoat (that's the reason that Salem had witch trials); it looks as though we're setting up the SWFs as the fall guys during the impending recession. We've seen similar reactions when the Japanese invested in US real estate such as Pebble Beach and Rockefeller Center and as hedge funds became more influential.

I'm not suggesting that the Chinese would never use the fund in support of their policy goals; it would be silly for them not to at least consider doing so. But, if we're concerned about the Chinese exerting economic influence over the United States, I'd be a lot more worried about the possibility of them dumping some of the half-trillion dollars in treasury bills they already hold.  Flood the market with dollars and they'd send our economy into a tailspin.  But let's not get overly concerned about the Chinese SWFs.  After all, if we want to maintain our economic power, we should stop leveraging our economy and running up our debts.

If I were a sovereign wealth fund right now, I'd probably look to invest my money elsewhere. As the New York Times described the feedback a US-based financier got when pitching SWF's recently:

“They invest in these financial institutions, lose their shirts and then they are criticized in Congress.” They are really upset, he said.

And get this, he added: “If you are a Saudi, you have to get your visa signed off by Homeland Security. I mean, why would you want to bail out a bank — you couldn’t even come to the closing dinner.”