Sovereign Wealth Funds

A Dumb Idea

Trump and the Democrats have come up with the idea that America should have a sovereign wealth fund. Plenty of other countries have them. However, just because plenty of other countries have them doesn’t mean America should have one.

It’s a dumb idea.

Governments can’t ever invest. They can only spend.

It is government spending that opens the door to inflation.

Where does that sovereign wealth magically come from? Taxpayers. It’s citizen wealth managed by politically connected people to further the goals of those who put them there.

There is no consequence for failure other than someone loses their job. Taxpayers take a bath with failure and the fund is recharged with more taxpayer dollars to spend. Sovereign wealth managers are not some magical asset allocators with a King Midas touch.

Investing should be done by private entities. They bear the burdens and risks of investing and also get the desserts if there are any. If there are successes, the capital is redeployed into places the private investors see fit to maximize return.

Public-private partnerships are also generally not a good idea. The needs of the public often outweigh the needs of the private. The needs of the public often don’t reflect the needs of the private, and satisfy the needs of government corruption.

Trump is imperfect. Not every idea he has is a good one. I hope he discards this one quickly. I wish he’d discard the tariff one too.