The Rise of Sovereign Wealth Funds (SWF)
In the late 90s, George Soros was pissed off with Asean for not
doing more to help the Burmese citizens, who where oppressed by
their own leader and had even murdered by the thousands,
burmese.
He was an hedge and pension fund operator, with billions in his
company accounts. He used such money to sell down asian currency,
beginning with Thailand. Thailand was an emerging economy, but the
valuation of its dollars went down, and had to devalue its currency
due to drop in confidence despite its strong credibility and
fundamentals, which made many thais suffered.
Businesses went bankrupt, run on banks, jobless rates rosed. And
in this panic, it led to other asian countries, whose businesses
were already not that clean or transparent anyway, causing lost
confidence and millions suffered. Thanks to Soros.
Many other hedgefund operators then saw what they could do with
their clients money, by the billions, and soon followed suit,
although not for altrusic reasons, good or bad, as Soros had.
They went into the market for short term gains, earn profits to
pay off themselves with huge salaries and better returns than banks
to investors. Many were sold on the premise that 'wealth begets
more wealth' being that hedgefund had billions of dollars in
holdings, their small savings invested there will bring them higher
returns than frigid and overly cautious banks.
Singapore realized Soros and his kind's financial power, and the
only way to prevent or defend the country was to use SWF - the
people's money - to protect its interests, sovereignity and
growing economy. Singapore learnt Soros's lesson well.
Unfortunately, not many countries, believing in the free market and
non govt - intervention, were keen on the idea.
If every asean nation had an SWF, it would have bankrupted Soros
attempt in selling down Thai baht. For every dollar Soros sold, an
united SWF would buy back ten times with their reserves, pushing up
the value of thai baht as well as other asean currencies under
attack.
Investors will instead be clamouring for Soros head on a pike in
market square for squandering their investment. But this was not
so. Soros won and won big, both in prestige and power, on what one
man could do, inspiring many others.
Now with this present crisis, the minimal amount of SWFs
could not help contain the panic. As much as Singapore tried to
help, with Morgan Stanley and few other institutions to prop them
up, there is only so much we can do. But many countries had now
realized the importance of SWF.
WIth SWF, theoratically, this financial crisis could have been
stopped, by using its existing international funds united to
checkmate hedgefund operators and bankrupt them. Investors will
have to accept the risks, but govts realized the social costs were
too high to pay.
So they offered taxpayers' current and future payments as
guarantees to banks to prop up financial confidence, in the absence
of SWF, and let the hedgefund operators and investments dictate the
market, to redeem their loses to pay off their investors, for their
recklesslessness and greed, at the expense of viable business
entities who saw their hard work and market valuation drop.
Many businesses suffered as a result, and investors confidence
at an all time low. Mistakes had been made, social safety nets
casted, and from these ashes, SWF will become mandatory for each
and every nation as a weapon against the massive funds
hedgefund/pension funds operators, which will attempt to grow and
repeat the mistakes made, because greed is ever present in mankind,
more so in a 'free cowboy market.
To keep up with the illusion of free markets, and allow capital
to flow for genuine investments, hidden in the dark corners will be
SWF, ready to swop on unsuspecting new hedgefund operators. WIth an
united front, SWFs will be able to reverse the damage HF operators
will attempt - by following HF actions in the opposite direction or
reverse their gameplay strategies -, because no HF can be as
massive a national fund or even an united fund, and will lose money
and credibility in time.
Howere, here lies the danger of SWF.
In its altrusic form, it can be a source of good to provide
capital for viable businesses with long term goals.
But as it is nationalistic in nature, it would only look after its
own interests, or the regional sphere. For example, were US and
Europe were to be angry with Asean's stand on Mynmar, it could join
forces and wreck the economies of Asean overnight.
Or if Opec is angry with its low price of oil, it launches a
high bid for its own oil with the help of Russia, and other nations
will bleed to death.
Thus, there is a need to regulate SWFs. My suggestion is a form
of ' Earth's Constitution' on what it can and cannot do, and all
nations adhere to its rule or by destroyed by it. If not, lives -
not only the leaders, but the common people's savings and
livehood, will be wipe out.
Diplomacy must be used to solve sovereignity issues. At worse,
arms be used. Even though i may not be 18 yrs old again and in the
prime of my youth, i can still shoulder a gun and hike
mountains.
Better it be resolved in the time old fashion than to
wreck the economy. Women, the old, and children are innocent.
Wrecking economies will only hurt innocent non-combatants such as
them.
Destroy HF by all means, but watch out for SWFs. If not, in 10
yrs time, the next cycle of financial crisis will be caused by the
clash of SWF's, and the repercussions will be more dramatic and
catastrophic.
For now, the rise of more SWFs has began, born from the embers
of this current financial crisis, a solution perhaps. Tamed, and it
could herald in a new era of regulated and stable form of
capitalism for financial wealth creation and monetary exchange for
the good of mankind, but untamed, like a nuclear bomb, it
will be the beginning of the end of mankind or at least a
significant large portion of it.