Tuesday, March 4, 2008

Our Sovereign Wealth Fund

An article today in the Wall Street Journal about the cash hoard of $600 billion on corporate balance sheets:

"The increase over the last decade in the amount of cash, as a percent of total assets, for the companies in the Standard & Poor’s 500-stock index has been steep. One study shows that the average cash ratio doubled from 1998 to 2004 and the median ratio more than tripled, while debt levels fell. According to S.& P., the total cash held by companies in its industrial index exceeded $600 billion in February, up from about $203 billion in 1998."

This is just the S & P 500 mind you. It occurred to me that this is actually the equivalent of a Sovereign Wealth Fund for the United States, less the Sovereign part of course.

What I mean is that in most of the countries that have large Sovereign Wealth Funds, the government usually owns a significant part of the economy, such as a National Oil Company, etc. Here in the United States, wealth accrues to the private sector, which is where our cash and wealth resides. Just imagine for a moment, if there was a National Oil Company in the United States that held all of its reserves of oil and gas.

What's the point of this diatribe? Sovereign Wealth Funds are not taking over the world. Stop listening to alarmist articles and commentators who are saying this.

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