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> All that capital from institutional investors, sovereign wealth funds, and the like has enabled start-ups to remain private for far longer than they previousl
by wahern 7y ago
> All that capital from institutional investors, sovereign wealth funds, and the like has enabled start-ups to remain private for far longer than they previously did, raising bigger and bigger rounds.
This misses the forest for the trees. These investors have so much money because the global economy has exploded over the past 20 years. Saudi Arabia has money to spend because it's selling oil like crazy--oil revenues began to explode after 2000. See https://tradingeconomics.com/saudi-arabia/government-revenues https://tradingeconomics.com/saudi-arabia/government-revenue... I didn't even know about Saudi Arabia's increased revenue, but I knew I could find data like that as it's a consequence of the monumental revolution in global wealth. It's not just China. The economies of Africa and Latin America have exploded over the past twenty years. Similarly, since 2000 most Asian economies began following the trajectory of the so-called Asian Tigers before them.
I've posted it elsewhere, but some reports from a few years ago projected over $300 trillion (trillion!) in global assets floating around, exclusive of real estate and capital equipment valuations (though some of that wealth shows up as securities). That dwarfs interventions like QE that everybody loves to bring up, which even if you account for the inflationary effect still only amounts to a small fraction of global assets.
If you don't appreciate the fundamentals for this explosion in cash then you'll be waiting forever for the other shoe to drop. Keep in mind that the global economy has been depressed since 2008-2010. Indeed, that's one reason there's so much cash parked in the U.S. But when the global economy picks up there'll be even more cash, so even if countries begin reallocating cash elsewhere, that doesn't necessarily mean a substantial drop in absolute terms in the U.S.
The U.S. has a significantly diminished position in global trade, relatively speaking. We may be the biggest trading partner for most countries, but most countries are also trading globally, so being the "biggest" partner for each country doesn't mean we dominate the global economy in the way we once did. Similarly, the complex global supply chain means the emphasis on bilateral accounting fails to appreciate how the underlying flows work and thus how the fundamental global economic engine operates.
The only "bubble" is in the U.S., and while we may see a correction any day now, it's not going to be cataclysmic. Not unless we make it so.
- zzzzzzzza 7y agohome price vs income ratio is higher in taipei than any city in us, and that's just one example
- wp381640 7y ago> These investors have so much money Saudi Arabia is running out of money - they have huge budget deficits and are steadily draining reserves. They're so desperate they considered selling parts of ARAMCO but couldn't get the over-inflated valuation they wanted The reason Saudi Arabia is spending money in foreign investment is because it's part of a last-ditch effort to diversify a dying and unsustainable economy
- wahern 7y ago> The reason Saudi Arabia is spending money in foreign investment is because it's part of a last-ditch effort to diversify a dying and unsustainable economy It's not a last ditch effort. It's been their strategy for like 50 years. It's just that it was always doomed to fail from the beginning. What changed is that they now have a lot more money to throw around and more places to throw it. I want to disagree with your characterization of their budget problems, but it's all beside the point. My point was that Saudi Arabia has ridiculous amounts of cash--much more than ever before--because the global economy has exploded. Saudi Arabia isn't printing funny money to invest in the U.S. They don't give oil away, and countries don't buy it with IOUs. The cash they're burning reflects actual, global economic growth. Likewise for SoftBank. Even if Saudi Arabia and SoftBank implode tomorrow, over the coming decades we're going to see these types of cash-rich investors multiply many fold. They're not anomalous; they're representative of changing fundamentals. The article author almost comes to this realization, but not completely. The world grew up while Europeans were navel gazing, Americans were shooting terrorists, and the Japanese were doing whatever the Japanese do (secretly bankrolling SE Asian growth?). We still act as-if the industrialization of the rest of the world is in the future. Spoiler alert: it already happened. Not happening. Happened. It may not look like what we expected, but the future never does. Like, 5 billion people doubled, tripled, quadrupled, and more their wealth. Global GDP more than doubled, much of which happened on the backs of people we assumed (and continue to assume) still didn't have two stones to rub together. That's where this surfeit of cash is coming from. It doesn't matter that most of these places still seem (and are) ridiculously poor from our perspective, or that in absolute terms the cash surfeit they're generating isn't that huge relative to our own GDP. The world is overflowing with cash, and whatever the magnitude it still represents a fundamental, qualitative change in the global economy. Even if global growth rates fall, from our perspective the avalanche of money might still continue and even accelerate. Fast or slow, for the next 50+ years things will only get crazier and weirder.