The Sovereign Wealth Weapon

The recent purchase by Abu Dhabi of $7.5 billion in Citigroup is a reminder of the new power player in the global economy: sovereign wealth funds. These funds worth trillions of dollars are wielded by foreign states and are slowly subverting U.S. interests and the welfare of the American people.

SWF’s are like a giant wad of cash for the country that runs them. They are government controlled and operated, composing about $3 trillion in worldwide capital.

The funds are growing in wealth at a rapid rate of 27%, and as such, increasing in power as a potential bully pulpit in international relations. At the G7 meetings in October, world leaders expressed their concern that these vast holdings lacked transparency and would be used as a new international leverage.

Their concerns are justified. Countries in possession of these funds aren’t stupid- they want a return on their investment and a leg up on other ‘competitor’ nations. It is good for business- it is good for their economy- it is good for their country.

But what it isn’t good for is America. We have seen our ownership; technology and profits slip away through the continued acquisition of our best companies.

Though August, 785 companies worth $129 billion have been acquired by foreign purchasers- the fastest rate of purchasing since 2001.

And sovereign wealth funds have been a big contributor to that- here are some of their notable recent deals:

China 10% purchase of the private equity firm Blackstone group

United Arab Emirates purchase of the department store Barney’s for $942 million

United Arab Emirates purchase $622 in computer chip maker AMD

These purchases are part of the larger problem of America’s fiscal deficits coming back to bite us. As the value of the dollar drops, foreign nations will unload their vast dollar backed holdings into the ‘safer’ investment of ownership of American companies.

These countries will continue to buy up our best companies, as America continues to run up huge trade deficits like the $765 billion balance of trade deficit in 2006. This loss of company ownership will escalate our already towering deficits and devastate our nation.

We must demand that the candidates running for office in 2008 address how they would protect America from being the victim of strategic investments of distant and shady sovereign wealth funds.

Our country- and our children’s future may very well depend on it.