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The writer is a longtime Silicon Valley investor
President Donald Trump, who dug a deep hole for the US with his tariffs, could now be about to make it even deeper with the creation of a sovereign wealth fund. It’s a proposal born of envy rather than sense.
The US president, who has made no secret of his desire to mimic the Bastille Day military parade or of sprucing up a Qatari 747 so that he can have a new Airforce One decked out with his own paint scheme, now wants to form a fund worthy of a Middle Eastern potentate.
The entire concept ignores reality. Unlike the Middle Eastern kingdoms, whose sovereign pools of capital have been formed with surplus oil revenue, the US is a debtor nation. It has less than $6tn of assets and debts of over $45tn. With the talk of tax cuts, the failure of the so-called Department of Government Efficiency to live up to its promises and now the prospect of a sovereign fund, America will only get poorer.
To generate the initial pool of capital for what should really be called the “Trump Fund”, the administration seems hell-bent on employing a financial sleight of hand. It wants to revalue US gold reserves and borrow against the inflated sum.
The designers of the Trump Fund talk about “monetising” or “securitising” the country’s assets. Those words, when used by Wall Streeters, are shorthand for saying we are betting we can make a king’s ransom on money we borrow. The tactic is reminiscent of the way in which Trump exaggerated the size and value of his own real estate portfolio to shake loose bank loans. We all know how that ended.
The proponents of the Trump Fund should compare their plan with the prudent and measured way other countries have organised sovereign funds. The shining example is Norway’s Government Pension Fund Global, created in 1990 when the Norwegian government, realising that its oil and gas reserves would eventually run dry, decided to invest close to 80 per cent of profits from its North Sea bonanza in a fund — now worth around $1.7tn — that would act as permanent ballast for a portion of state spending.
The same goes for GIC and Temasek, two vehicles established by the government of Singapore, the former investing the country’s foreign reserves, the latter an entity originally charged with managing stakes in companies previously owned by the state. Or look at how Canada runs the Canada Pension Plan Investment Board or Australia’s superannuation funds, which are organised at the state level and also manage citizens’ pension contributions.
If Trump and his advisers are too proud to follow the lead of other nations, then they should look closer to home, at Alaska. In 1980, Alaskan leaders created the Alaska Permanent Fund to invest 25 per cent of the state’s revenue from North Slope oil. Each year the fund, which began with less than $1mn and now has around $80bn of assets, pays out a dividend to every Alaskan resident.
The Trump Fund seems a whim, nothing more. The other funds I’ve mentioned were, at inception, insulated against political meddling and have largely succeeded. It’s hard to imagine today’s Republicans insisting on similar guardrails when they already turn a blind eye to Trump memecoins and his family’s insatiable appetite for fattening its own purse.
If the US is forced to have a sovereign fund, it should be known as the Tariff Fund. Instead of borrowing yet more money against the future, the US should sequester any money generated by tariffs and employ these with great purpose. They should be invested in two things: companies that build development and manufacturing capacity in the US and in research and development of tomorrow’s critical technologies. If, however, a sovereign fund is concocted just to mollify the fancies of the president, then faith in the American financial system’s greatest asset — trust — will be dealt another savage blow.
