brotherpeacemaker

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Foreign Investment In America

It’s no news that the euro zone is in a bit of financial trouble these days.  Greece, Spain, and Italy have taken turns drawing global attention for dabbling on the brink of total financial collapse.  There’s been a lot of commotion about whether or not Germany, considered the strongest participant in this great fiscal experiment, will kick its contributions up a notch to come to the rescue of just about everybody else.  The German citizenry aren’t happy that they have to spend their tax dollars helping the citizenry of countries with economic policies that do little to promote national fiscal responsibility.  The whole shebang appears to be as precarious as a house of cards playing Russian roulette in tornado alley.

A lot of people and financial institutions with huge investments in euros know that there is a huge financial risk with that currency.  If one country collapses it could trigger a chain reaction that would spread across the planet at the lightning fast speed of electronically exchanged money.  No country would be safe.  But it’s a fair bet that countries with currencies other than euros would fare much better than the ones that do.  So a lot of people are taking their euros and are actually making huge investments in American greenbacks.  In no way shape or form would the dollar be immune from the financial crisis that would consume Europe.  But the dollar would offer a lot more protection from the downfall of the euro than the euro would.

People who earn their living knowing what’s happening with money know this.  So some people are trying to hedge their bets by putting a good chunk of their change in dollar investments.  Back in April of last year, one hundred dollars would buy you 67 euros.  Today, that same hundred will buy you 81 euros.  That’s better than a twenty percent change in the dollar’s favor and the trend shows no sign of abating.  And with the dollar looking more attractive these days around the planet, investors in Europe are actually investing in America.

Despite some claims that our corporate tax rates are the highest on the planet, foreign companies continue to make investments in America.  For years, car makers from Europe and Asia have built assembly plants inside our borders.  Airbus signed a deal to build an assembly plant down in Alabama just last week, right in Boeing’s backyard.

Now, some people want to say that America’s corporate tax rates disincentives American corporations from investing in America even though American corporations are among the most profitable in the world.  Year after year, quarter after quarter, month after month we hear about record profits at oil companies and financial companies.  It was announced that JP Morgan lost more than four billion dollars on bad trade deals by a rogue trader, but the company’s reserves are more than capable of taking that huge hit.  American corporations are sitting on more than two trillion dollars of cash that they hesitate to invest supposedly because it’s just too expensive to do business in America.  Obviously, a lot of corporations are just waiting for a better deal so they can make even more money.

But that’s okay, because as long as our home grown companies sit on the sidelines waiting for another handout, corporate Asia and corporate Europe will make the investments where corporate America fears to tread.

American automobile manufacturers have learned the mistake of sitting by while their offshore competition moved to make investments in their backyard.  Once, the top three carmakers in America were GM, Ford, and Chrysler by wide comfortable margins.  Toyota, Nissan, and Honda made big investments in America while the big three sat on their laurels.  By the time the American car companies woke up from their Rip Van Winkle like slumber, Toyota was the largest most profitable company in the world.  The former big three are now fighting back, but the days of taking their business for granted are long over.

Despite high corporate tax rates, America remains the best investment for a lot of businesses, inside our borders and outside.  If corporate America wants to sit back and wait for better deals, if corporate America doesn’t wants to take advantage of business opportunities right here and right now, if American corporations want to keep their money offshore and invest in the euro or some other currency, then that’s their right.  But foreign investors see the advantages of investing in America right here and right now while the home team sleeps.  It’s nice to know somebody out there in the world still appreciates doing business in America and investing in the American worker.

Monday, July 16, 2012 - Posted by | Life, Thoughts

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