Fallacies about sovereign wealth funds

Here’s one of them:

One often reads statements that sovereign wealth funds provide unique
benefits to the international financial system because, for example,
they make needed capital injections into western financial
institutions. No one should doubt that the recipients of those capital
injections have benefited from them, and in time the citizens of the
countries with the funds may benefit as well. However, sovereign wealth
funds are not net providers of capital to western financial markets.
For the most part, they are merely recyclers of global financial flows.
In this respect, they do not differ from central banks and other
government-controlled entities or from private sector investors. The
only issues are where they invest, how wisely those investments are
made, and how accountable the investors are for their decisions.

Here is the whole piece, which is generally quite good.  So what is wrong with this passage?  It’s not attaching enough importance to the idea of gains from trade.  If capital has "left" the U.S., it’s because there was some gain from that transaction, such as when we buy oil.  There’s then a subsequent gain if those revenue are invested wisely in the United States.  It’s not just a wash through "recycling."  If you spend some money in stores, and then some people then invest in our company, that’s not a wash either.


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