To demonstrate my assessment of the Bush administration’s devaluation of the dollar and its effects called out in an earlier post, look at the sale of ALCAN to Rio Tinto yesterday (a British company paying with British pounds). Rio Tinto outbid Alcoa, an American company, $101 to $77 per share. So Rio Tinto paid over 31% more than Alcoa offered in US dollars.
In June 2001, the early days of the Bush administration, the pound was worth as little as $1.36. Yesterday it was at about $2.03. So the pound’s value has risen some $ 0.67 or over 49% against our currency. Simple math and you see that Alcoa would have easily outbid Rio Tinto in pre-Bush dollars. And the fallout from this will likely be a fire sale of Alcoa as other investors get the idea. Yes, we are going to see a lot of mergers and buyouts in the coming months as the bargain hunters begin to pick at the carcasses of parts of America’s industrial base.
Hard to blame this on terrorism and the war. Great Britain has managed quite well under similar conditions. The economic storm clouds are gathering. The stewards of our economy and industry are failing.