Monday, January 28, 2008

Silver Linings Amid Dark Clouds

Weak Dollar Fuels China's Buying Spree of U.S. Firms - Ariana Eunjung Cha @ Washington Post

I'm not an economist so take my opinion here with a grain of salt. Even so, I see the rapid rise in acquisitions of U.S. firms by Chinese ones as something of a positive. While the falling dollar makes it more difficult for U.S. firms to buy into foreign companies, the opposite is that foreign firms feel they have the ability to invest in American companies at bargain prices. Some may see a weak dollar as a sign of falling U.S. financial power in the world but if foreign companies believe that there are good investment opportunities in the states then that's a reassuring sign of the strength of the American economy. As Cha notes, we have experienced the same thing in the 70s and 80s with the Germans and the Japanese respectively. Yes, there is some warranted concern but that has more to do with the politics between China and the U.S. than with the economy. Chinese companies either operating or opening U.S. firms bring in much needed jobs and job security. On an even brighter note, such investments from China are a sign of a lessening militaristic stance against the U.S., if China has had one since the 90s. You don't press too many political hot buttons if you have serious investments in a particular nation. At the same time, yes it is worrisome that China will have greater pull with U.S. lawmakers since more American jobs will depend on China's money. But ultimately, this infusion of cash into the U.S. economy will help it stave off any serious recession. Now if only the price of precious metals like gold and platinum would come down then jewelers like me won't have to raise our prices so much.

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