President Trump wants the United States to be in the investment business, said Jenny Leonard and Katherine Burton in Bloomberg. This week, Trump signed an executive order directing officials to create a national wealth fund. Trump floated the idea of a sovereign wealth fund –in essence, an investment fund owned by the government– during the campaign, proposing the “money from tariffs” could be used to “invest in manufacturing hubs, defense, and medical research.”The Monetarily Sovereign U.S. government does not use any income for spending. It does not use taxes or “money from tariffs” (which effectively are taxes on American consumers). Having the infinite ability to create dollars, the federal government destroys all the dollars it receives and newly creates every dollar it spends. Even if the U.S. government did not receive a single tax or tariff dollar, it could continue spending dollars forever. Thus, the “wealth fund” could pay any amount it chose, at any time, to whomever it chose. Unlike a privately owned fund, a government fund can do whatever it wants with investors’ money, including keeping it. Witness America’s Social Security, which changes the rules every year. You have been told that your FICA dollars fund Social Security. They don’t. If they did, the government couldn’t change the qualifying dates at will and couldn’t tax the benefits you supposedly paid for. Trump and the Republicans have promised to eliminate income taxes on Social Security benefits, which they have the power to do. Or they could double the taxes, at will. The “wealth fund” could pay you any amount it chose, whenever it chose, and change the rules every day, at whim. So, what would be the purpose of a government investment fund, and how would that be different from accepting deposits in T-bills, T-notes, and T-bonds? Further, funds must have an investment philosophy. That is, will the fund mimic the S&P? The largest growth stocks? The total stock market? Include foreign stocks? Or will it be traded according to some other formula, and if so, which? Never one to be bothered with details, Trump doesn’t say. But those are vital questions.
Other wealth funds generally exist in nations with excess money, either from “large foreign exchange reserves, like China, or revenue from the sale of oil.”
Trump floated the suggestion that “the fund could facilitate the sale of TikTok.”
Utter nonsense. The U.S. government has the financial ability to buy TikTok along with FaceBook, X, and every other app, and still has plenty left for politicians to pave their local streets in gold.Let’s hope this doesn’t go anywhere, said Dominic Pino in National Review. A sovereign wealth fund makes sense for oil-rich states like Saudi Arabia and the United Arab Emirates, which pull in massive revenues and “don’t have a ton to spend it on.”
According to the U.S. Energy Information Administration, the United States has produced more crude oil than any nation at any time, according to our International Energy Statistics, for the past six years.
Crude oil production in the United States, including condensate, averaged 12.9 million barrels per day (b/d) in 2023, breaking the previous U.S. and global record of 12.3 million b/d, set in 2019.
Average monthly U.S. crude oil production established a monthly record high in December 2023 at more than 13.3 million b/d.
A sovereign wealth fund in oil-rich nations facilitates the foreign exchange of local currencies and eliminates the need to rely on foreign exchange markets. The money is invested and banked, transforming into whatever currency the nation desires. In dollars, the U.S. is the world’s second-largest oil exporter. That fact has nothing to do with the U.S. creating a government-owned fund. The U.S. government has infinite money and infinite things to spend it on.Among Western countries, “Norway is the canonical example of a successful sovereign wealth fund,” But it has money to spend, averaging a budget surplus of 10 percent of GDP since the 1970s.A “budget surplus” means the government takes more money out of the economy than it puts in. The formula for GDP is GDP=Total Spending + Net Exports. Norway is a major exporter, and though it technically is Monetarily Sovereign, when was the last time you accepted payment in Norwegian Krones? Still, it has the unlimited ability to pay its own people in Krones, so its fund cannot run short of money unless the government wants it to. And finally, we come to the most naive statement in the entire article.
The U.S. is running enormous deficits, “would have to borrow even more money to start a wealth fund,” and is a “poor steward of the money it already controls.“The authors display that they have no idea about the differences between Monetary Sovereignty and monetary non-sovereignty. 1: The U.S. government never borrows dollars. Think about it. Given the unlimited ability to create dollars, why would it ever borrow? It makes no sense. The economically naive think that allowing deposits in Treasury Security Accounts (T-bills et al.) represents borrowing. It doesn’t. A borrower takes ownership of money to spend or invest that money. However, the U.S. government never takes ownership of T-security dollars, and it never spends those dollars. Think of T-security dollars as being similar to dollars placed in a bank safe deposit box. The bank takes possession of the dollars but does not have ownership of the dollars. The T-security dollars remain the property of the depositors; the federal government never touches those dollars. It doesn’t use them for spending purposes. It only possesses the dollars. This is not borrowing. It is safekeeping. T-securities’ sole purposes are to help the Fed control interest rates and provide a safe storage place for unused dollars. They do not provide spending money to the government. 2: Federal deficits are not a burden on the federal government. Unlike you, me, business, and the state and local governments, the federal government could deficit spend, forever. It neither needs nor uses tax dollars or any other form of income. 3: Federal deficits are essential for GDP growth. Every depression in history has come when the federal government ran a surplus; government surpluses take dollars out of the economy, which reduces GDP. A reduction in GDP is known as a recession (short term) or a depression (long term). The federal government would not have to borrow even one dime in order to start a wealth fund. It could begin to one tomorrow — a fund containing a trillion dollars or a trillion, trillion dollars — at the touch of a computer key. (The government also has the Constitutional power to create a multi-trillion dollar platinum coin, and deposit in the General Account from which to write checks. It’s unnecessary, but legal.) And as far as the government is a “poor steward of the money it already controls,” who does the author think would control the investments in the wealth fund if not the “poor steward” federal government? In summary, both the proponents and opponents of the “wealth fund” demonstrate ignorance about federal financing. Their pro and con comments apply to a private-sector fund, not to a Monetarily Sovereign government fund. Trump, as usual, wants something he can twist into his own self-enrichment. Imagine him controlling a few trillion in assets, that the Supreme Court has ruled he can steal at will because he is immune to prosecution for actions taken as part of his official duties. You can be sure that pumping a few billion or trillion into Trump properties will be considered “official duties” by the compliant Republican-controlled Senate and House. These bodies currently have no duties but to attend, vote “Yes,” and leave. And yes, to cash their paychecks and take advantage of their ill-gotten perks. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/
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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 