Effor.com

This is a repost of a thought provoking article I found on The Daily Reckoning.  You can read the original post on their site at: http://www.dailyreckoning.com.au/america-turns-to-foreigners/2008/01/22/

About the only thing I’d add to Mr. Bonner’s excellent insight is that if you think the falling dollar has created some excellent buying opportunities, just wait - you ain’t seen nothing yet.  I don’t have a specific timeframe in mind, but as long as we collectively spend more than we make, the slide of the dollar - and the US - will continue. 

Will we end up like the Greeks and Romans?  Or like the Soviet Union?  Perhaps it doesn’t matter….

Thanks to The Daily Reckoning for permission to repost it here!

gk

America Turns to Foreigners for Money

Posted by Bill Bonner on Jan 22nd, 2008

There is much disagreement among analysts and commentators: will there be a recession… how bad will it be? But one thing that all agree on is that, “inherent U.S. vitality remains enormous,” and that the U.S. economy will “bounce back.”

Oh yeah?

When everyone thinks the same thing, no one is thinking at all. And everyone now seems to think that whatever is ailing the United States, it will pass. We disagree.

The rules don’t change. Instead, the rules determine how circumstances change. And circumstances can change for a very, very long time.

The Athenians have been waiting 2,300 years for their empire to “bounce back.” The Egyptians have been waiting even longer. And the Seleucids? The Mongols? The Incas? The Romans? Rome is a nice city but the Rome of Berlusconi is hardly the Rome of Augustus. The city never bounced back. And the list of empires that never bounced back is as long as the list of empires. Once they are history, they are history.

When you spend more than you can afford, you get poorer. That’s the rule. So, it should come as no surprise that Americans are getting poorer… though they are just beginning to realize it. Now, when they need money…they have to turn to foreigners… to their imperial competitors.

In the last couple of weeks, some of America’s biggest financial firms have turned to Asians for multi-billion-dollar infusions. The Asians - who’ve been following the rules - working… saving - now have trillions to put to work. The Gulf States, too, have trillions in oil revenues. In the Gulf, they’re building new cities. In Asia, they’re building new industries.

And in America?

The foreigners are putting their money to work - buying up key industries.

“For much of the world, the US is now on sale at discount prices,” says the International Herald Tribune . “Last year, foreign investors poured a record $414 billion into securing stakes in US companies, factories and other properties through private deals and purchases of publicly traded stock.”

We hasten to add that we’re not agin’ it. Politicians will rant and rave about the “loss of US capital and industries.” But it’s a little late for complaining. The loss has been going on for a long, long time. As Americans spent more than they had, the foreigners built up credits. Now, they’re cashing them in. What else can they do? And what would you expect? The falling dollar has reduced Americans’ earnings…and it has cut prices on their assets, too. Now, people with money are taking advantage of the situation.

If you have a factory or a business… you might consider selling to the top bidder - probably a foreigner. If you have no business to sell, well, maybe you can shine the foreigners’ shoes.

There’s no denying what it all means… America’s edge in the world is slipping away. Americans are getting poorer - relative to others. This is an adjustment that probably won’t stop anytime soon. The United States will probably never bounce back to the heights it enjoyed in the ’80s and ’90s.

Bill Bonner
The Daily Reckoning Australia