Friday, October 15, 2010

The Shadow Market How A Group of Wealthy Nations and Powerful Investors Secretly Dominate The World By Eric J. Wiener

The Shadow Market How A Group of Wealthy Nations and Powerful Investors Secretly Dominate The World By Eric J. Wiener

This book explains the flow of global capital away from the United States and Europe.  It gives many reasons why Europe and the United States currently are not growing and are in a recession.  The book describes how China, the Middle East, India, Brazil, and Russia are growing at an accelerated pace.  It also describes how Norway has an outsized impact on global markets because of its oil fueled sovereign wealth fund.

We learn how private equity and hedge funds which have little or no oversite are moving capital away from the United States into areas where there is more opportunity for growth.  There is no longer any responsibility to the country they operate in.  The goal is to generate as much wealth as possible irregardless of where the wealth is coming from.

At the same time countries are creating investment pools called Sovereign Wealth Funds which use their capital to invest as a country.  China, Norway, Brazil, the United Arab Emirates are some of the countries which have created these funds.  They are often used to buy up land, commodities, and oil which the countries need to operate.  In combination with government control of currency in places like China and Brazil, they create artificial markets where labor and capital is cheaper than in free markets.

Sovereign Wealth Funds are used to buy technology, commodities, oil, infrastructure, and development.  They are sources for national capital not individual investors.  This is a different kind of investing than the United States uses in the stock markest.

Not all of this is beneficial, many countries with Sovereign Wealth Funds use their money and oil for ends that are not beneficial to other countries.  The author uses the example of Libya, Syria, and the United Arab Emirates as possible places which fund terror.  He also describes how wealth is often used as a tool to push past human rights.

He also describes how the United States in its weakened condition is turning to more outside investment.  The United States is increasingly encouraging foreign investment onto our shores.  It reminds me very much of how our multinationals once invested in South American countries.

I found the book to be informative and alarmist.  It explained how the United States and Europe were losing their economic competitiveness.  I think it is a wake up call.  It reminds us that we cannot turn to the usual answers, but instead need to innovate, create new technology and ideas and put people back to work.  It showed how the Middle East, China, Russia, Venezuela, Norway, and other countries are using their wealth on a national level to change the commercial playing field.  It was well worth reading.

1 comment:

James Beaty said...

I like reading blogs about book reviews, always good to get other people's take on books which are out there which is how I stumbled upon yours.

Keep up the good work. I came across this review and thought I may as well order the book as I am a bit of a stickler for books on finance and financial trends (agrees with my cynical mind!). Mnaaged to pick this up for $4.99 including postage at I found it a little bit conspiracy theorist but interesting nevertheless. A good book if you have some time on your hands.