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CIAO Focus, May 2008:
The U.S. Economy and Sovereign Wealth Funds

Largest 11 Sovereign Wealth Funds

Earlier this year, Citigroup and Merrill Lynch, two American banks that had suffered huge losses in the wake of the sub-prime mortgage fiasco, were bailed out by sovereign wealth funds operated by the governments of Singapore, Kuwait, and South Korea.

A sovereign wealth fund is a pool of money controlled by a government (rather than a company) and uses material wealth, such as foreign currency reserves, as its investment capital. Until recently, exporting powerhouses like China, Japan and the oil producers of the Persian Gulf kept their vast reserves in the form of bank deposits or United States Treasury debt. But with the declining dollar, many countries are now investing this money in foreign corporations for a greater rate of return.

Although SWFs have been around for decades, they have only been making headlines within the past year because the money these funds are investing in American companies and commercial real estate has increased exponentially at a time when the U.S. economy is in decline. Collectively, SWFs control approximately US$2.5 trillion, and are growing by $1 trillion a year.

This month CIAO examines the U.S. economy and sovereign wealth funds.


From the CIAO Database:

Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization

Public Footprints in Private Markets: Sovereign Wealth Funds and the World Economy

Foreign Office Futures

Why Interest Rates Are Rising

Outside Sources: *

Sovereign Wealth Funds: Backgrounder (Council on Foreign Relations)

The Truth about Sovereign Wealth Funds (Foreign Policy)

The Rise of Sovereign Wealth Funds (IMF)

Sovereign Wealth Funds and U.S. National Security (The Heritage Foundation)

The invasion of the sovereign-wealth funds (The Economist)


* Outside links are not maintained. For broken outside links, CIAO recommends the Way Back Machine.