This is a quote from Peter Shiff’s weekly column.

On Tuesday of this week we learned that in 2006 Americans racked up a record $763.6 Billion trade deficit, and that two Australian mining firms, Rio Tinto and BHP Billiton, were each contemplating $40 billion bids for U.S. aluminum giant Alcoa.  Not only did Wall Street and the media fail to grasp the negative significance of each story, but they also failed to see the strong connection between the two.

By running huge trade deficits, Americans are literally selling cows to buy milk.  Alcoa is just the latest heifer headed for the auction block.  In other words, because we do not trade enough domestically manufactured consumer goods for those we import, we are making up the difference with our assets instead.  To the extent that foreigners are tiring of buying more Treasuries and mortgage-backed securities, they are casting their eyes on industrial assets.  Last year’s trade deficit alone provided foreigners with enough dollars to buy twenty Alcoa’s.

Many Americas do not see the downside of such a transfer.  In fact, they might even see it as a benefit, as shares of Alcoa would likely rise sharply.  However, in exchange for losing one of the world’s preeminent mining companies to Australia, Americans would only be compensated by the return of their paper dollars. Future profits that would have been earned by Americans will now be earned by Australians instead.

We have seen this type of action in the past the UAE trying to buy some east coast ports and the Chinese trying to buy an oil company.  If the government steps in and stops this sale from going through like the others foreign governments will no longer be as willing to hold our dollars let alone extend the 2 billion dollars that we require daily to keep our economy going.