There were the headlines, right on the front of the February 26 Wall Street Journal: “U. S. Pushes Sovereign Funds to Open to Outside Scrutiny.” We are told that “Seeking to head off a political backlash against huge investments in Western companies by Asian and Middle Eastern government-run investment funds, the U. S. is prodding two of the biggest funds to embrace a set of promises that they won’t use their wealth for political advantage.” The request: Please don’t act in your own interest.
The economic policy of the previous seven years, the Bush/Greenspan version, has come home to haunt us and the U. S. is now pleading with offshore interests to “be gentle with us.” The monetary and fiscal policies of the past seven years have resulted in an almost constant decline in the value of the U. S. dollar. American assets have never been available at such cheap prices and, due to other policies, such as those related to energy, offshore interests have the wealth to scoop up these assets. Furthermore, the same governmental policies that resulted in the weak dollar also helped to underwrite inflationary financial relationships. As a result, not only is the dollar weak, but many of our major institutions are weak so that they ‘need’ the infusion of funds from offshore to keep them healthy.
It is interesting to hear the candidates running for President of the United States talk about all that they are going to do economically when they are elected. Much of what they are promising, I believe, will have to be put on the shelf for a later time until some balance is restored to our basic monetary and fiscal policies.