Tuesday, 26 February 2008

‘Sovereign’ means . . . Sovereign !

Here’s a mighty exercise in self-delusion. The EC is hoping to persuade the owners of gigantic sovereign wealth funds to sign up to a code of conduct. El Presidente Barroso has pronounced:

We cannot allow non-European funds to be run in an opaque manner or used as an implement of geo-political strategy.

"We will not propose European legislation”, he graciously declares: but he's not to be trifled with: “we reserve the right to do so if we cannot achieve transparency through voluntary means"

This 'we' who *cannot allow* would be the ‘we’ who have been rushing round soliciting sovereign dosh to bail out our failing banks, I take it. Presumably Barroso imagines the Chinese are awaiting the EC’s proposals with trepidation, and that when he tells them to behave like Norway – his chosen model for a Sovereign – they will be keen to fall in line. Or something...

At C@W we have been writing about the Sovereigns since the days when everyone else was worrying about private equity. Let’s get the basics straight. If ‘we’ continue to dismantle our economies and pour trillions of money into the hands of the nations in question, then there is going to be a shift in the balance of power. We don’t like it ? Fair enough, but let’s not embarrass ourselves with this posturing.

Opaque ? Tool of geo-political strategy ? Yes indeed: they ain’t called ‘sovereign’ for nothing !



Sackerson said...

"we should not make the mistake the English made of trying to govern the world, we shall merely own it. Nothing can stop us now!"

Allegedly a quote from an American official in 1932, reproduced on the back of Robert Wyatt's 1982 LP:


Ed said...

I have no problem with foreign governments owning "our" assets or infrastructure. Not only does it surely mean that the owning country is less likely to do anything to upset their investment, if anything does go wrong Parliament can just nationalise it for £1 then sell it straight back to British investors.

Parliament is the only sovereign power in this land.

Sackerson said...

"Parliament is the only sovereign power in this land."

... isn't, should be.

Ed said...

Is, because it **could** decide to leave the EU if we put enough pressure on it.

CityUnslicker said...

ND makes a good point. In pure economic terms too it is very important that the liquidity is kept in the global system.

if all the west's money was simply to languish in arab and asian bank accounts the world would run out of money for investment and become a poorer place very quickly.

The money needs to come back to the West somehwo to be put to productive use again if the recipient economies can't do anything with it.

trying to stop this is absolutely economically illiterate - which is entirely what I would expect of Barroso and his ilk.

Sackerson said...

Ed - I'm right behind you there. But if you also want the power to nationalise domestic, foreign-held assets without compensation, you'd better hope we're in the Premier league militarily.

CU - The EU, UK and US are complaining about hangovers, when they should stop drinking. Putting ouselves in the power of foreign governments that may not always have friendly intentions, is far from wise. Who has the bottle to sort out the mess we're in?

Anonymous said...

Simple Solution:

SWFs should just start buying tons of commodities, bidding the prices to incredible levels. The Americans (and other deficit countries) would squirm from the resulting simultaneous weakening of the dollar (or deficit country currency) and skyrocketing price of commodities (thus consumer prices).

After that, they would be begging the opaque SWFs to go back to financial assets.

Anonymous said...

.....European funds to be run in an opaque manner.....


Anonymous said...

Sadly we are doomed. Totally and irrevocably. You see the Chinese need food, apart from everything else, and that is something that is in ever shorter supply right now. So when the Chinese start using their sovereign wealth fund to buy food you see prices go up, as they have done. Of course the Chinese don't like that, so the next thing they will do is start buying farms in the West. And poor old blighty will be left out in the cold with nothing worth selling to import the food and energy it needs for almost half of its population.

The sovereign wealth funds will be used to purchase the MEANs of production, not merely the output of the production. This is the danger that sovereign wealth funds present.

Inflation is hitting food disproportionately because the improtance of food is rising disproportionately. There are millions more people with the power to buy more food. The food that we want to eat too. Can we compete with them for this food? No. We don't have anything to sell, and we need to start the race to the bottom to be in a position to sell what little we have.

Britain is about to be wiped out in the next generation. There is likely to be civil war and mass emigration. I can't see any other outcome for us. Competing tooth and nail with China will drag us down to the same level, with most of the population on starvation rations. De-population will be the only long-term solution.

CityUnslicker said...

RS - I disagree re China. They have population ageing problem that will substantially limit their growth.

In addition as commodity prices increase there will be a shift back to farming. UK can produce far more than it currently does, albeit in a relatively more expensive way.

All I will agree to is that standards of living may drop as regards to accessibility of food as it becomes a more expensive resource.

As for the UK civil war - that may be but it will be over pension provision and be along age lines rather than anything else.

CityUnslicker said...

Sackerson - much liquidity is needed, it is not a zero sum game.

I also recall Japan in the 80's coming to eat us all and put us into penury with their unstopable economic power.

Sackerson said...

We may need liquidity but it ought to be our own, shouldn't it? Isn't boasting about our capital account like boasting about the size of our mortgages?

Anonymous said...

"I also recall Japan in the 80's coming to eat us all and put us into penury with their unstopable economic power."

Be careful. Japan has a population of 120million, compared to China's 1300million. Japan wouldn't make much impact on the Western world in terms of its food demands, but China certainly could - 300million Chinese live below the bread line. The demands of the Chinese for cheaper food have overthrown Chinese authorities many times in the past. They are strongly driven to secure food supplies for their people.

We should bear in mind also that, Japan invaded China prior to WWII in order to cope with its ever increasing population. It wanted more "living space" for its expanding population just as Hitler looked for "liebensraum" ten years after the Great Depression started.

We may think that such food wars are a thing of the past, but in reality they were merely suppressed by the so-called "Green revolution" of the 70's. The reality is that the benefits of the Green revolution have now been completely absorbed by the rapidly growing populations of India, China and South America. These countries are now turning to rapid industrialisation to try and buy the food they need from places that are net exporters like the US and Australia, knowing that they cannot produce any more of their own food using the benefits of 70's technology. They are now in the position to buy large stocks of wheat and are setting about doing so. Britain relies on its wits for exporting things to pay for the food we import - but this is increasingly undermined by our export of UK jobs to the Chinese and Indians. Meanwhile many of our sharpest citizens have seen the writing on the wall and have taken their families to a better future in Australia, New Zealand and Canada. Plenty of farmland there, of course....

During a housing market boom, how much do you pay for your house? AS MUCH AS YOU CAN AFFORD! Well that boom is over and a new one is beginning. How much will you pay for your daily bread in ten years time? AS MUCH AS YOU CAN AFFORD!

The solution for some seems to be to buy land. Farmland prices are rising rapidly. 46% of land sales are to non-farmers. Are these people that are in the know and have clicked on to the future for this country? Well if they have I guess they had better buy a gun too. Things could turn very nasty.

Anonymous said...

If you want to learn a lot more about UK over-population this site is perfect:-


OPT research suggests that a sustainable population for the UK should not exceed 30million. Currently we are already at twice that, and the population is growing very fast now. We are being squeezed from both sides - our own population growing to unsustainable levels and the populations of emerging economies growing and buying the food from under our noses.

Mark Wadsworth said...

What Ed says. That's the beginning and the end of the debate AFAICS.

Nick Drew said...

wow, I go away for two days and WW III breaks out !

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