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I saw someone asked about Trump’s sovereign wealth fund a few days ago, and here are some very superficial thoughts about it.

Of course, as Stephenie Kelton already wrote in her blog, SWF is completely non-sensical for the US, who is the one who runs huge trade deficits such that other countries can accumulate the dollars the US spent (by exporting their own goods to earn the dollars) to store in their wealth funds.

In other words, the US can simply print the money it needs to spend, and storing “wealth” in a fund while you are not running a surplus is a completely ridiculous idea.

However, let’s get a bit creative about it. From The Class Politics of the Dollar System by Feygin and Leusder, an interesting paragraph stood out near the end:

Thirdly, the United States should begin to view its deficit not as a problem but as a public resource, and to manage it like energy exporters use sovereign wealth funds to avoid Dutch Disease. To administer this public good, the US should establish a series of public banks to fund specific economic investment initiatives. The Federal Reserve would guarantee the debt of these institutions by discounting it at a penalty rate for reserves or United States Treasury debt or dollar reserves. These securities could thus trade at a slightly higher yield than treasuries and provide investors with an alternative product to general purpose treasuries. The liabilities of these investment vehicles would provide global collateral and promote financial stability while also offsetting the effects of dollar hegemony on domestic industry via permanent, active investment.

So, in theory, here’s what the US can do: Trump’s SWF can offer its debt (guaranteed by the Federal Reserve) at a slightly higher yield than US treasuries. So when the US spends its money as usual, and when the surplus dollars are absorbed back to the US government, instead of buying treasuries, investors could choose and even prefer to purchase the SWF debt offering a slightly better return. Then, the US government can use these new “wealth” from the SWF to fund active investment in domestic industries, thereby circumventing the “national debt” problem.

Notice that nothing has really changed here, what changed is merely the re-framing of US deficit spending from the federal government “racking up national debt” (bad! scary!) into “investing them in wealth fund” (good! prudent!) with extra steps. There is absolutely no need to do anything like this but this roundabout way might play better for the media and the people’s perception of how the government manages its budget.

Again it all depends on the mechanisms of the proposed SWF (no details yet, and I also haven’t double checked the logic of the flow yet), whether the US financial infrastructure actually allows this (I’m not an expert) and whether it is in the class interest of the bourgeoisie to do so.