China's CNOOC, the third largest petroleum company in China (and state owned) wants to buy UNOCAL, a petroleum company in California, in an effort, no doubt, to secure oil reserves to fuel their burgeoning economy. Chevron Corp. has offered $16 billion for UNOCAL and CNOOC has offered $18 billion.
Some congressmen see this as a threat to our national security (sadly, only 40 of them.).
This is creating a dilemma that I knew would occur eventually and the implications could be huge. What we have here is a nation that has accepted US dollars in transactions for goods and services. The US dollar is a promise to pay and lawful tender for all debts public and private. In other words, as declared by the issuing country, these dollars cannot be refused.
In a capitalist economy, the shareholders of UNOCAL are entitled to receive the best offer for the company maximizing the value of their shares.
If it is the case that CNOOC (China) is not allowed to buy UNOCAL, China will undoubtedly question the benefit of holding so many US dollars as the purchasing power of this "money" appears to be limited.
A case can be made that there appears to be double standard regarding the true convertibility of US dollars into wealth. If China comes to this conclusion, it could have a major impact on all things economic in this country as the inflow of dollars from China are largely responsible for keeping our economy afloat.
Read more at the link.
