Sovereign wealth fund... move along - nothing to see here

[Sarkus]

So, Trump has ordered - one of his now record number of Executive Orders raised by a President in their first 30 days - the creation of a Sovereign Wealth Fund (SWF).

A SWF is a state-owned investment fund that invests in things like stocks, bonds, hedge funds, etc. Basically, just another investment fund, but owned by the government of the sovereign country, supposedly for the benefit of the country. They're typically funded by budgetary surpluses, as holding cash is not as beneficial as holding other classes of assets.

The US doesn't run at a surplus. It's running at a c.$2tn deficit this year.

So why the SWF? This will surely just exacerbate the deficit, right? Well, some argue that as long as the SWF produces a return that is higher than the government's borrowing rate, what's the issue? But this wouldn't generate wealth for the country, but rather would just transfer economic activity from the private sector to government. Whatever growth the SWF generates from returns would otherwise have been made by the private sector. And borrowing money to buy stocks just requires future taxpayers to repay that debt, while the government reaps the benefit.

It really doesn't make sense for the US to go down this route. Especially when, if you look further down the track, you end up with the US Government having a partial ownership of many sectors of the economy. Taken to an extreme and it is socialism - a state-owned economy. Trump was touting using this SWF to buy a 50% slice of TikTok. This would in effect nationalise a social media company. Is this really what Americans want to pay for? Why does Trump even care about saving TikTok? Has he been given an incentive to do so, to allow it within the US? It's an odd focus.

And then there's simply the bad idea of a federal investment fund that would be so open to cronyism, corruption, political interference etc, using the fund to favour political backers, friends, even self. Give it all the necessary controls, run it by someone entirely independent of government and politics (or else the investments will just flip-flop between those that benefit the Reps and those that benefit the Dems) and maybe it could be run sensibly. But that's still just covering the operational risks, not justification for doing it in the first place.
I mean, what controls would Congress have over how this money is allocated / invested? Would it not end up being a means of granting his billionaire friends direct access to public money? Doesn't that usually have to go through Congress?


So how will this be funded? Surely the EO gave all the details, right? I mean, it wasn't just a memo, scribbled in crayon, saying "Trumpy wants an SWF!", right?
Well, it typically offered scant detail, although Trump has suggested that it will be funded by tariffs. Yes, those tariffs that he has currently capitulated on, and that are already a bad idea for the world, and which were supposed to fund, well, everything to the point that they could do away with Income Tax, right?

I wouldn't put it past Trump to have gone with this idea because other countries - i.e. China - and other corrupt leaders around the world - have their own "Big Boy's Toy" to play around with, and Baby-Trump wants his own rattle.
As one person put it: "The federal government is a poor steward of the chunk of it that it already controls. It should control less, not more. US wealth is best off in private hands."



Are there any upsides to this latest Trumpism that are not outweighed by the apparent magnitude of the potential fuck-it-uppery?
Does anyone care?
Or is it just yet another Trump midnight-hour crazy scheme that won't see light of day in any meaningful way?

 

[exchemist]

So, Trump has ordered - one of his now record number of Executive Orders raised by a President in their first 30 days - the creation of a Sovereign Wealth Fund (SWF).

A SWF is a state-owned investment fund that invests in things like stocks, bonds, hedge funds, etc. Basically, just another investment fund, but owned by the government of the sovereign country, supposedly for the benefit of the country. They're typically funded by budgetary surpluses, as holding cash is not as beneficial as holding other classes of assets.

The US doesn't run at a surplus. It's running at a c.$2tn deficit this year.

So why the SWF? This will surely just exacerbate the deficit, right? Well, some argue that as long as the SWF produces a return that is higher than the government's borrowing rate, what's the issue? But this wouldn't generate wealth for the country, but rather would just transfer economic activity from the private sector to government. Whatever growth the SWF generates from returns would otherwise have been made by the private sector. And borrowing money to buy stocks just requires future taxpayers to repay that debt, while the government reaps the benefit.

It really doesn't make sense for the US to go down this route. Especially when, if you look further down the track, you end up with the US Government having a partial ownership of many sectors of the economy. Taken to an extreme and it is socialism - a state-owned economy. Trump was touting using this SWF to buy a 50% slice of TikTok. This would in effect nationalise a social media company. Is this really what Americans want to pay for? Why does Trump even care about saving TikTok? Has he been given an incentive to do so, to allow it within the US? It's an odd focus.

And then there's simply the bad idea of a federal investment fund that would be so open to cronyism, corruption, political interference etc, using the fund to favour political backers, friends, even self. Give it all the necessary controls, run it by someone entirely independent of government and politics (or else the investments will just flip-flop between those that benefit the Reps and those that benefit the Dems) and maybe it could be run sensibly. But that's still just covering the operational risks, not justification for doing it in the first place.
I mean, what controls would Congress have over how this money is allocated / invested? Would it not end up being a means of granting his billionaire friends direct access to public money? Doesn't that usually have to go through Congress?


So how will this be funded? Surely the EO gave all the details, right? I mean, it wasn't just a memo, scribbled in crayon, saying "Trumpy wants an SWF!", right?
Well, it typically offered scant detail, although Trump has suggested that it will be funded by tariffs. Yes, those tariffs that he has currently capitulated on, and that are already a bad idea for the world, and which were supposed to fund, well, everything to the point that they could do away with Income Tax, right?

I wouldn't put it past Trump to have gone with this idea because other countries - i.e. China - and other corrupt leaders around the world - have their own "Big Boy's Toy" to play around with, and Baby-Trump wants his own rattle.
As one person put it: "The federal government is a poor steward of the chunk of it that it already controls. It should control less, not more. US wealth is best off in private hands."



Are there any upsides to this latest Trumpism that are not outweighed by the apparent magnitude of the potential fuck-it-uppery?
Does anyone care?
Or is it just yet another Trump midnight-hour crazy scheme that won't see light of day in any meaningful way?

Perhaps it should be called the WTF. The goat rodeo continues.

 

[Seattle]

So, Trump has ordered - one of his now record number of Executive Orders raised by a President in their first 30 days - the creation of a Sovereign Wealth Fund (SWF).

A SWF is a state-owned investment fund that invests in things like stocks, bonds, hedge funds, etc. Basically, just another investment fund, but owned by the government of the sovereign country, supposedly for the benefit of the country. They're typically funded by budgetary surpluses, as holding cash is not as beneficial as holding other classes of assets.

The US doesn't run at a surplus. It's running at a c.$2tn deficit this year.

So why the SWF? This will surely just exacerbate the deficit, right? Well, some argue that as long as the SWF produces a return that is higher than the government's borrowing rate, what's the issue? But this wouldn't generate wealth for the country, but rather would just transfer economic activity from the private sector to government. Whatever growth the SWF generates from returns would otherwise have been made by the private sector. And borrowing money to buy stocks just requires future taxpayers to repay that debt, while the government reaps the benefit.

It really doesn't make sense for the US to go down this route. Especially when, if you look further down the track, you end up with the US Government having a partial ownership of many sectors of the economy. Taken to an extreme and it is socialism - a state-owned economy. Trump was touting using this SWF to buy a 50% slice of TikTok. This would in effect nationalise a social media company. Is this really what Americans want to pay for? Why does Trump even care about saving TikTok? Has he been given an incentive to do so, to allow it within the US? It's an odd focus.

And then there's simply the bad idea of a federal investment fund that would be so open to cronyism, corruption, political interference etc, using the fund to favour political backers, friends, even self. Give it all the necessary controls, run it by someone entirely independent of government and politics (or else the investments will just flip-flop between those that benefit the Reps and those that benefit the Dems) and maybe it could be run sensibly. But that's still just covering the operational risks, not justification for doing it in the first place.
I mean, what controls would Congress have over how this money is allocated / invested? Would it not end up being a means of granting his billionaire friends direct access to public money? Doesn't that usually have to go through Congress?


So how will this be funded? Surely the EO gave all the details, right? I mean, it wasn't just a memo, scribbled in crayon, saying "Trumpy wants an SWF!", right?
Well, it typically offered scant detail, although Trump has suggested that it will be funded by tariffs. Yes, those tariffs that he has currently capitulated on, and that are already a bad idea for the world, and which were supposed to fund, well, everything to the point that they could do away with Income Tax, right?

I wouldn't put it past Trump to have gone with this idea because other countries - i.e. China - and other corrupt leaders around the world - have their own "Big Boy's Toy" to play around with, and Baby-Trump wants his own rattle.
As one person put it: "The federal government is a poor steward of the chunk of it that it already controls. It should control less, not more. US wealth is best off in private hands."



Are there any upsides to this latest Trumpism that are not outweighed by the apparent magnitude of the potential fuck-it-uppery?
Does anyone care?
Or is it just yet another Trump midnight-hour crazy scheme that won't see light of day in any meaningful way?

I agree. I would probably benefit from a SWF that bought a lot of Bitcoin but the idea doesn't make sense for the US for the reasons that you have mentioned.

It's an unusual argument for the left in that they are usually OK with increasing the size of the government and now they are concerned about the private sector...but I do agree with your argument.

 

[Sarkus]

I agree. I would probably benefit from a SWF that bought a lot of Bitcoin but the idea doesn't make sense for the US for the reasons that you have mentioned.

It's an unusual argument for the left in that they are usually OK with increasing the size of the government and now they are concerned about the private sector...but I do agree with your argument.

Interestingly, the Dems investigated this idea previously, under Biden, even. It may be that a bipartisan agreement could be reached through Congress that mitigated all the risks posed by Trump/his cronies having any direct influence, and actually tried to make it work for the population as a whole. And if the scale of it was initially small - the odd few billion, say - then it's not going to have too much of an impact on the overall deficit while offering some strategic "government aid" to important sectors.

There are likely a number of ideas that, if governed by a truly independent body, might be a reasonable idea, but would be appalling if Trump or his cronies had too much influence.

 

[TheVat]

It's an unusual argument for the left in that they are usually OK with increasing the size of the government

As an Indie - left/libertarian on social issues, fiscal conservative, off the spectrum entirely on militarism and power - am sometimes curious how the Left got so attached to large government. Its roots were more small government if you consider Karl's concept of an evolution towards worker collectives and an end stage of minimal top-down control. The state is supposed to wither away at some point and it's all puppies and free solar and locavore food. No idea if that's possible, but a powerful bureaucratic State is not where the Left was philosophically grounded. The current irony in play is that it's RW oligarch wannabes who are claiming to want to shrink the State. Unfortunately they don't really want the more horizontal social structure that would go with that, or the massive reduction in military. If DOGE really meant its charter, we would be dismantling our absurd world-annihilating arsenal down to a simple deterrent to bad actors. But those juicy military contracts are something the billionaires can't give up.

 

[Seattle]

As an Indie - left/libertarian on social issues, fiscal conservative, off the spectrum entirely on militarism and power - am sometimes curious how the Left got so attached to large government. Its roots were more small government if you consider Karl's concept of an evolution towards worker collectives and an end stage of minimal top-down control. The state is supposed to wither away at some point and it's all puppies and free solar and locavore food. No idea if that's possible, but a powerful bureaucratic State is not where the Left was philosophically grounded. The current irony in play is that it's RW oligarch wannabes who are claiming to want to shrink the State. Unfortunately they don't really want the more horizontal social structure that would go with that, or the massive reduction in military. If DOGE really meant its charter, we would be dismantling our absurd world-annihilating arsenal down to a simple deterrent to bad actors. But those juicy military contracts are something the billionaires can't give up.

Most of those billionaires aren't billionaires because of military contracts. If you are referring to the space contracts that's just their hobby (apparently). Amazon is why Bezos is a billionaire and that has nothing to do with military contracts.

It's true that a classical liberal, now called a libertarian is as you described it. That's not what most current liberals are about though.