The author is a long-term Silicon Valley investor
President Donald Trump has dug a deep hole for the United States with his tariffs and can now go deeper by creating sovereign wealth funds. This is a suggestion of jealousy rather than rationality.
The U.S. president has no secretly mimicked the military parade of the Bastille season or imposed the Qatar 747 effort so he could have a new air force that stands out with his own paint plan and now wants to form a strong Middle East fund worthwhile.
The whole concept ignores reality. Unlike the Middle East Kingdom, the monarchy capital pool of the Middle East Kingdom is formed by surplus oil income, and the United States is a debtor country. Its assets and debts are less than $45TN. With discussions on tax cuts and the so-called government efficiency ministry failed to deliver on its promises, now the prospect of sovereign funds, the United States will only become poorer.
To generate the initial capital pool truly known as the "Trump Fund", the government seems to be hell in its hands of hiring financially. It wants to revalue U.S. gold reserves and borrow additional amounts.
The designers of the Trump Fund talk about “monetizing” or “securitizing” the country’s assets. When Wall Street people use it, these words are saying we bet on ransoms that we can borrow. This strategy is reminiscent of Trump’s way of exaggerating the size and value of his real estate portfolio to shake loose bank loans. We all know how this ends.
Trump fund supporters should compare their plans with the prudent and measured way other countries organize sovereign funds. This shining example is Norway’s government pension fund Global, which was founded in 1990 when the Norwegian government realized that its oil and gas reserves would eventually run dry, decided to invest in 80% of its 80% profit in the northern Sea Bonanza, now worth $170 million, which would be a permanent balllast for a part of the country running for.
The same goes for GIC and Temasek, two cars established by the Singapore government, the former investing in the country's foreign reserves and the latter being the entity that initially managed stakes in companies previously owned by the state. Or see how Canada operates the Canadian Pension Plan Investment Council or Australia’s pension funds, which are organized at the state level and also manage citizens’ pension contributions.
If Trump and his advisers are proud to follow the leadership of other countries, they should be closer to their home in Alaska. In 1980, Alaska leaders created the Alaska Permanent Fund, investing 25% of the state's revenue from North Slope Oil Company. The fund, which starts at less than $1 million each year, now has about $80 billion in assets, pays dividends to every Alaska resident.
The Trump fund seems to be temporary, that's all. The other funds I mentioned were shut down political intervention at the start and were largely successful. It’s hard to imagine today’s Republicans sticking to similar guardrails because they have turned a blind eye to the dissatisfied appetites of Trump members and their families for their wallets.
If the United States is forced to own a sovereign fund, it should be called a tariff fund. The United States should not borrow money against future money, but should isolate any funds generated by tariffs and use them for a great purpose. They should invest in two things: companies that build development and manufacturing capabilities in the United States and research and development of key technologies tomorrow. But if it is just to raise the president's fantasy, then the construction of sovereign funds will be another savage blow to the confidence in the largest asset (trust) of the U.S. financial system.