State Capitalism: Trumping Privatization?

Published: January 8, 2008, 2:16 pm

Tags: state capitalism, privatization, brad setser

Brad Setser highlights a topic that I haven't given any thought to before. It's on his list of top macro and financial stories of the year (link):5. Wall Street embraces state capitalism. Privatization: Over. The really big money is now to be made from cross-border nationalization. Transparency, at least from governments with rapidly growing assets: over-rated. Funds that don't have to disclose their total assets, let alone report to pesky, risk-adverse parliaments are far more fun -- and certainly far more willing to snap up big stakes in distressed banks.The story of 2007 though isn't the scale of the increase in the size of sovereign wealth funds.As of now, the $1 trillion annual increase in the assets of sovereign wealth funds is just a forecast, unlike the $1 trillion plus annual increase in central bank reserves.Sovereign wealth funds did probably add about $250b to their assets in 2007, but that total is somewhat deceptive. It seems likely that China shifted a bit over

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