Thread: America for sale

America for sale
It's not just Wall Street bailouts. Foreign ownership of U.S. assets is accelerating - and that's a worrisome trend.
By Geoff Colvin, senior editor-at-large
(Fortune Magazine) -- The big foreign-money purchases of stakes in Citigroup, Merrill Lynch, and Morgan Stanley are merely a hint of what's ahead in 2008. Foreign buyers, such as sovereign wealth funds from countries like Kuwait and Singapore, will continue to make headlines by grabbing major U.S. assets this year, and the trend is much broader than investments in Wall Street firms that need a capital infusion. What's important to understand is why this is happening - the reasons go beyond what most people realize - and why it may be even more worrisome than it seems.

Such deals were hot even before the bank bailouts. Foreign buyers set a record last year by purchasing $414 billion of U.S. assets - even more than they bought in the wonder year of 2000. The usual explanation is that the dollar was cheap, which was certainly an important factor. But more had to be going on. Many of the biggest deals were done by Asian or Middle Eastern buyers who already hold much of their wealth in dollars. Those investors didn't get a discount because of the dollar's declining value. In addition, U.S. stocks were hitting record highs through much of last year, so it's hard to say that American businesses in general were bargains. Why, then, were foreign buyers so busy?

The overlooked part of the answer goes back a decade to when Americans started buying a whole lot more from other countries than they were buying from us. We'd been running a trade deficit since the 1970s, but it took off in the late 1990s and has been galloping ever since. All those dollars we send into the world come back to us - some as purchases of our goods and services, and the rest, equal to the trade deficit, as investments. For many years those investments have been mostly in U.S. bonds, which is the usual pattern in these situations. After a while, though, foreigners who hold tons of another country's bonds start to get nervous. They realize that the government might be tempted to make its debt a little less burdensome by inflating the currency, rendering the foreigners' holdings less valuable. So the foreign creditors hedge their bets by buying direct ownership stakes of the debtor country's assets (see, for example, much of Argentina's history).

That's what is happening in America today, and we can expect much more of it for two reasons. First, the Fed's rate cuts - four since September - are inflationary and will spook foreign creditors further, spurring more equity buying. Second, our trade deficit remains massive, probably exceeding $700 billion last year; that's money that will have to come back as investment in the U.S.

It isn't necessarily bad when foreigners buy chunks of U.S. businesses. Those ailing Wall Street banks certainly needed the capital. More broadly, the many lower-profile investments by foreign entities that happen every day are votes of confidence in the U.S. economy, and they create thousands of jobs for Americans.

But here's why the trend is troublesome, and more so now than ever. According to the Bureau of Economic Analysis, the rest of the world currently owns way more of America (stocks, bonds, real estate, etc.) than America owns of the rest of the world, by a margin of $2.6 trillion (as of year-end 2006; a 2007 figure is due in July and will be larger). Net foreign ownership is increasing very rapidly; it has multiplied by a factor of five in just the past decade. As it grows, we must send more dividends and interest to foreign owners, giving them more money with which to buy more U.S. assets, earning more dividends, and so on.

This compounding effect is small when net foreign ownership is low, but at today's levels the effect is becoming significant and ever harder to reverse. Where it leads is grim: As a nation we eventually cease to be capitalists and become simply wage earners. As Warren Buffett put it in a prophetic Fortune article more than four years ago, a country that goes too far down this road can be "colonized by purchase rather than conquest."

That isn't inevitable. We can turn our situation around by saving more and spending less, and market forces, such as a weakening dollar, will help us do that. But every day we don't, the hole we have to climb out of gets a little deeper.

http://money.cnn.com/2008/01/30/news/ec ... 2008020609

Outsourcing will not be a problem in another 2 years. Dollar's bottom is about to give away. There will be no respect for dollar in the world. Dollar store will be like a 4 dollar store.

However the outcome will be good.

Mexicans will not come running into America. Illegal Immigration will not be a problem AND WE WILL HAVE OUR MANUFACTURING JOBS BACK.

The falling dollar has already caused big problems both for foreign outsourcing companies and foreign workers who come here to make a pile of bucks fast. We need to get back to making, doing, and selling things ourselves, not just buying and hiring foreign.

US standard of living was the best in the 70s.

illegal immgration was not a problem.
Outsourcing was not a problem
helathcare was not a problem
social security was not a problem.

The mindless mass consumption supported by a overvalued dollar has ruined America. We need to have a standard of living in par with the world. Dollar is not high because of its true value. We are militarily enforcing that all world's oil is traded only in dollars.

Such kind of currency manipulation and imbalance cannot be sustained in the long run.

Saudi Arabia makes billions of $$$ selling oil. To support a extravagant lifestyle for all itz citizens it just has to pump and sell. Saudi citizens dont have to pay for electricity or gasoline or telephone lines. Any physical labor is done by imported labor from third world nations. Any high end work is done by firstworld executives stationed there. Looks like they have it made. But because they get their money with no sweat the country knows nothing. They cant build a wall on their own.

This is what is happening to America. While a third world citizen saves for a year to buy a dvd player which he will use for 10 years, we buy dvd players as impulse purchases. Why simply because our currency is 30- 40 times the currency of a thirld world nation. We are being lured into a world of consumption and no production like the Saudis.

All jobs high end and low end are moving out. Our food supply has moved out. America needs to be a nation of day laborers, farm workers, cab drivers as well. Not just white collar professionals. We need to be an independent nation consuming what we produce. Doing all our jobs ourselves.

The foreigners to whom we are sending all our money by our mindless mass consumption are going to start owning us. Fox news is one example. The media outlet for America's rightists is foreign owned. GM and Ford are the last standing American auto manufacturers. Ford will be bought out in a year. Citi group today cannot go against the wishes of a middle eastern country that lent citi group the money.

ppl set up a bulletin board like this one, raise some money and think they have power. There are 100's of anti amnesty forums like this and MCcain gets elected. People dont have the power , policies are set by the powerful. and foreigners are buying our power mongers. they are increasingly controlling ceos and senators ..ppl who matter.

I remember the 70's, but the Arab oil embargo of '73 (I think) was a shot across the bow. Still, it takes a lot to bring a nation the size of America down. Nevertheless, the loss of hundreds of thousands of good-paying jobs over the last 8 years may do the trick.

Originally Posted by bluecollar

Outsourcing will not be a problem in another 2 years. Dollar's bottom is about to give away. There will be no respect for dollar in the world. Dollar store will be like a 4 dollar store.

However the outcome will be good.

Mexicans will not come running into America. Illegal Immigration will not be a problem AND WE WILL HAVE OUR MANUFACTURING JOBS BACK.

If you think whats going on in France and London is a good thing maybe .

If you think this nation being run by 14th century sharia laws it may be a good thing . Aalready the leaders allow swearing in on the isalmic quran [ Ellison ].

I think it is a terrible thing that we have already all but made our judio-christian religion all but illegal, while at the same time setting up special schools and rituils like footbaths, and gender segregatd schools all over the nation .

Seems to me that the mexicans were allowed to come in long enough to vote in the enemy within ,now that they have control, they are starting to run them back home .

I don't want the Mexicans, Cubans, Somalians, Irais Iranis, Irish or any other illegal here ,period !

Those who own our resources and land, own us, plain and simple !

The media and hollyhoods makes one half truth or out righrt lying movie after another about slavery and the mistreatment of our black citizens .

This is a ploy to cause division or they would also divide the blame equally on the black slave masters and the torture they did to their own people who we bought the slaves from . Slavery is evil no matter who practices it !!

No man should own another . But all over the world slavery is still going on , especially in black muslim nations . Not to speak of the raping, butcherings and tortures done by blacks on their own people in , Sudan,Darfur,Somalia ,etc..
Whers the race hustlers and the black outcry for these innocent poor people who starve, get cut to pieces ,beheaded and other evil things ? Who goes there to help them ,who sends the money , it's not the blacks rich atheletes or the black rich entertainers, it's the white middle class Americans who donate and send in the checks . I don't help them anymore, because I found out my donations was benefitting their torturers . But for years I 'adopted' children in these areas .

Originally Posted by BetsyRoss

I remember the 70's, but the Arab oil embargo of '73 (I think) was a shot across the bow. Still, it takes a lot to bring a nation the size of America down. Nevertheless, the loss of hundreds of thousands of good-paying jobs over the last 8 years may do the trick.

now they dont have to impose an oil embargo, they just have to start accepting other currencies for their oil.