Is there a true risk from sovereign petrodollar funds and the central Asian banks?

December 17th, 2007 | Category: International Markets, Forecasts, Oil, China, India

What does the coming year hold for the economy? BloggingStocks’ Peter Cohan considers five issues that will factor heavily in 2008.

Sovereign Wealth Funds (SWFs) are estimated to be amoung $2 trillion and $15 trillion. That’s a wide range, but even at the low end, it’s a lot of money. The SWFs are potentially profitable and political Trojan horses. They are using the current problems in the credit markets as a chance to buy stakes in U.S. banks for relatively paltry sums. It remains to be seen whether they are getting in at the bottom or whether they’re foolishly buying in way too soon.

However, whether they get big suitable stakes in strategic industries

in the U.S., they will be in a position to influence U.S. policy. For example, whether the funds do not like U.S. Middle East policies, they can threaten to withdraw their capital. whether that capital is tough to replace, the U.S. will find itself needing to choose amidst imperiling the survival of its banking system or changing its foreign policies.

Peter Cohan is President of Peter S. Cohan & Associates. He plus teaches management at Babson College and edits The Cohan Letter.

Original post by Peter Cohan

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