Tuesday, September 4, 2007

Bogeymen of Financial Capitalism

by Nouriel Roubini from the Project Syndicate News Service

According to Morgan Stanley, Sovereign Wealth Funds (SWF’s) are expected to manage $12 trillion by 2015, up from about $2.5 trillion today. Both sums dwarf the sums controlled by hedge funds and private equity groups. Thus some of the biggest investors in financial markets in the coming years will be government institutions - the biggest of these institutions are in China, Russia and some unstable petro-states ... Views about how to respond to the SWF’s vary. Some worry about reciprocity: if Chinese firms are allowed to invest in U.S. and EU firms, shouldn’t U.S. and EU firms be allowed to invest freely in any Chinese firm? Others worry about national security: what would happen if “our” ports and security industries or other “strategic” firms were taken over by China, Russia, or Saudi Arabia?

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