The Money is beginning to Flow to Europe: How Chinese Money may make Europe Rise as we Fall

 

 

 

The United States of America assures China that we’re a good investment while allowing the nefarious Federal Reserve to rapidly debase our currency by printing more money; what’s wrong with this picture? The Europeans have reformed their protectionist trade barriers, to Beijing’s delight, and suddenly the Chinese are happy to invest in Europe.  Europe had such a bone headed structure that they didn’t attract a single dollar of Chinese money last year and now the Chinese have something they desperately want: an alternative to investing in the USA.  Even more to the point; as the Chinese find Europe to be an excellent alternative to the USA and as Europe reaps the rewards of all that Chinese money in their economy, the Americans may find the Middle Kingdoms river of endless cash has finally dried up. 

What will Congress do when they can’t get their next “cash fix”?  Granted that the nefarious Federal Reserve has already printed more than enough US Dollars to destroy our currency as key nations cut us off from the credit and investment fix but if China Likes what it finds in Europe than America could be in deep trouble.

If the Chinese and the Arabs find Europe a more productive and safer market they may face the prospect of having to do MASSIVE cuts in entitlements and a tacit admission that the Governments safety net is a cruel illusion when no one will loan us money. Our social saftynet programs like Social Security and Medicare could dry up overnight.  They may have to admit that everything the democrat party stands for in the way of “helping people” simply doesn’t work because the money is gone. Big government is corrupt government and the money for Social Security and Medicare is gone.  We cant afford them without destroying the economy and the end result would be the same.  No more entitlements.

 China has been worried about the security of their investments for some time now and they’ve had high ranking financial officials admit to “hating” the United States, and what we’re doing to the value of their investments, but we’re the only game in town.  China, Russia, Latin America, Iran and the European Community have openly admitted their belief that the world needs “new financial structures” and a new reserve currency that is in no way dependant on the United States or any other single nation.  Essentially the world has been calling for the replacement of the dollar and new non American financial leadership. The world wants a new reserve currency with new institutions and new regulatory structures and they’re tired of funding Washington’s profligate spending.  I don’t think any objective American Observer can disagree with them because it’s become clear that we are suffering from a political as much as an economic breakdown with no likely solutions on the horizon.  What world unity there is on the financial crisis exists as a planetary consensus that America can’t be allowed to run the show anymore and the Europeans with their transnational Euro have the most experience in implementing what the rest of the world wants:  A world reserve currency that no nation can dominate.

While the world turns to Europe, as China is doing, and as Europe discovers the advantages of Chinese and Arab money flowing their way: the one nation left out in the cold with a mountain of crippling debt, engulfed by a tsunami of hyper inflation, encumbered with a dying currency and political turmoil, will be the USA.  The Europeans seem to have better leadership, with Merkel in Germany for example, and they’re doing the right things while we’re doing everything wrong.  It will look obvious in retrospect but we can’t solve our debt problems by adding more debt and pretending it’s a solution. 

Like Detroit we can’t afford our entitlement programs any more than the former Big Three could afford their pensions, and retiree benefits.  Like Detroit the country can’t afford our unions anymore because they’re a death sentence to any industry that is afflicted by them.  The only sector that’s adding jobs, despite being heavily unionized, is government.  The Parasitical Unions have finally found the only kind of host it can co-exist with in government: because government, unlike business, is not expected to be efficient, make a profit, or even be reasonable.  Government unlike the Auto makers can print more money and raise taxes and that’s what they do so they don’t die as fast as a private sector venture. 

But things are getting better!  Aren’t they? 

I too saw a ghost of a smile on the face of Neil Cavuto last week as he reported the generally upward motion of stocks lately; but he also sounded a prudent note of caution.  Our problems are still with us and anything could upset the apple cart with catastrophic ramifications for the American economy.  We’re not out of the woods yet and the wisest and most sober analysts I can find assure us that the worst is yet to come. 

Here’s a little something I found on Bloomberg:

China’s Wealth Fund to Consider Investing in Europe (Update2)

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By Eugene Tang

April 18 (Bloomberg) — China’s $200 billion sovereign fund will consider investing in Europe in 2009, after avoiding the continent last year because of trade barriers, said China Investment Corp.’s Chairman Lou Jiwei.

“Europe has started to welcome investments” without attaching conditions, Lou said today at the Boao Forum in southern China’s Hainan province. “During the world financial crisis, sovereign wealth funds have become more appealing” and less frightening, he said. Beijing-based CIC, whose investments have included stakes in Blackstone Group LP and Morgan Stanley, didn’t invest “a single cent” in European companies or assets last year, because the continent had put up barriers to limit the activities of sovereign wealth funds, he said.

The agency was founded to provide better returns for China’s foreign-currency reserves, the world’s largest at $1.95 trillion. The fund last year earned $10 billion from its investments, representing a 5 percent return, Radio Television Hong Kong reported on Feb. 24, citing a source it didn’t identify.

“There was rising protectionism against China last year, and the European Union had the worst” limits, Lou said today. “They allowed us to invest in no more than 10 percent of a company’s stakes and required us to give up our voting power” in management, he said.

“We couldn’t accept that because investments should be based on market practices,” he said. “With the removal of these conditions, we will seriously consider making decisive and prudent investments overseas this year, including in Europe.”

He declined to specify the European industries or companies he’s looking at investing in.

To contact the reporter on this story: Eugene Tang at Boao on at eugenetang@bloomberg.net

Last Updated: April 18, 2009 06:30 EDT

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