It's time for a Soverign Wealth Fund
America's system does not lend itself well to long term strategic planning. But we can address that and implement stategic planning in a democratic and capitalist function, structured by we the people
In summary, I’m calling for Congress to form and fund a permanent sovereign wealth fund (SWF), an independent body in the same manner as the Federal Reserve, however, the executive branch has the power to set long-term priorities and national objectives the fund should work toward. 3 public seats, and 3 private - all voting. The chair is voted on and selected amongst the board. I’m thinking Secretary of the Treasury, Secretary of Defense, and Secretary of State for the public seats. Then the executive branch can appoint 3 members, during different intervals, for 6-year terms, guaranteeing any given president a chance to shape the leadership, if not completely shape control of a supermajority of the board with two terms. The private sector appointees would need to be confirmed by the Senate. While Congress would appropriate an initial outlay, future year funding requests would need to come from the president and would require from the board detailed explanations for the funds, how they plan on tracking success or failure, and determining if they fit the nation’s long-term strategies. Congress has the right to deny future funding requests, and while originating in the lower house as a bill, a supermajority in the upper chamber would be needed to force the fund to invest/disinvest in a specific investment. The governing board would be subject to regular oversight hearings by congress, and substantial disclosures on the use of funds - barring of course any national security-type topics/expenses. I would want to see the initial funding of the SWF at $1 trillion, then a $100 billion injection every year, for 5 years. That would then put the US on the top of the largest SWF fund by 2-300 billion. Depending on thresholds of return, say the fund sees a 15% return, then 75% of those funds would be returned to taxpayers via some sort of contract be it a direct payment or a tax credit (Alaska does this, they have a mini SWF that distributes $$ to Alaskans earned from drillers in the state. If the US SWF fails to reach a 15% return, then there would be no yearly distribution and they would retain gains and make those funds usable again for investments in the coming years.
The SWF as I see it could invest directly in securities; private or public, invest in debt - whether it be AAA investment grade debt or debt of a company on the cusp of collapse as a way of becoming new equity holders as it comes out of bankruptcy. The SWF could also issue LOC to companies/initiatives deemed worthy and fit within the guidelines established by its long-term strategic objectives. It could also establish new companies, build management teams, inject funding, equity, financing, or otherwise, and then quickly look for a U.S. buyer or carry the investment through to a public offering, where the SWF can finally step away and “exit” from managerial responsibilities (though with $1.5 trillion in assets, I'm sure they would be able to build a worthy management team for a “small” company - small being billions in this context).
The impetus / political dynamic that got me down this road is that due to our unique - and exceptional - system of government, we are in some ways at a large disadvantage (this is only true for small, emerging countries with no established legal system, common law, property rights, etc. every modern flourishing democracy evolved out of an autocratic system) to autocratic/strong men type countries (only if the leader is smart and trusts smart people). We have the power to quickly expel bad leaders from power; especially in the house, but even the highest office in the land has a short leash. The issue with this is for both, about 50% of their tenure is dedicated to campaigning (more so Congress than POTUS). Additionally, due to our system requiring obtaining substantial support from many groups in this country, you must campaign on policies that will deliver desired and popular results as soon as possible. A plan with a significant upfront cost and sacrifice to the public with a potential payout somewhere down the road is often a hard, if not impossible political sell. Also, with such short windows of power, elected officials focus on the short-term, rather than the long-term impacts and needs of the country. The thought is well to fix a problem 8 years from now, I need to win today's election, therefore I’m going to campaign on this potentially far less important issue and ignore the long-term one lest my opponent makes me look out of touch or not concerned with voters' interests. So, in short, our system really handicaps long-term vision, strategy, and sophisticated policy.
A good example – is Obamacare, while not a fan (I was once fiercely against any form of universal healthcare, now I am a staunch supporter - from the right if you can believe that!) of how it was done and implemented, the motivation was good, and it was an issue that needed to be addressed. The problem is we were coming out of a devastating recession, a labor market completely trashed, household net worth cut in half, and so forth. That alone makes messing around with an industry that makes up 20% of our GDP, and far more when you start bringing in small/med/large business mandates. Also, Obama lacked a cooperative Congress. I'm quite impressed something even got done - I was actually on Capitol Hill the night it passed. But my point is, overhauling and reconfiguring a giant part of life and the economy, especially in such unstable economic times, in a rushed and urgent manner, was a display of our system at its worst. Reform of healthcare is desperately needed, still, despite o care. But it’s going to take a lot of very smart people, working together, using the best ideas of both political sides, to come up with a truly successful universal system. It’s not something that can be done in a few months with 50% of the people voting for or against it with a political gun at their heads.
That’s a process that a president should start a working group on in the first few days of his admin (preferably worked on before he even ran), bring in the brightest physicians, bring in the pharma and medical CEOs, bring in insurance company leaders, and get them to work together and work out a new system that works for all parties, limits the government's direct involvement with healthcare decisions while still providing assurances of healthcare access, and leaves no stone unturned, adds no new onerous regulatory requirements that aren’t needed, caps and limit’s malpractice, opens insurance to cross state lines, and say look, you have 2 full years to craft a legislative solution for a new system. If you fail to do that, there will be repercussions. We will default to a single-payer system; totally bypass insurance players; regulate every aspect of healthcare, increase malpractice payout caps, etc. basically something that would make all the players upset. And I guarantee you that with two years of the ability to privately Come up with a system, you’d end up with a much better result than some several-month processes and a midnight vote. Some of the most important US institutions were done in similar manners. The federal reserve is. Great example. A small group of senators went to a vacation destination off the coast of Georgia if I’m remembering correctly; and in total secrecy, they drafted the bill that led to the formation of the central bank, which in my opinion is one of if not the most powerful institution in the world outside of the U.S. military. But it took years, and many tries to get that bill done.
So, we have a beautiful system that ensures fresh blood, but the terms and lengths of power almost necessitate dependence on think tank/lobby groups on drafting legislation and a forced artificial urgency on issues important to key donors. If you asked me, what are American strategy and goals for the next 10 or 20 years? I couldn’t tell you, and I don’t think anyone out there could really give you a certain answer. China, on the other hand, that question would yield a very specific response. Command economies are bad, but there is a big distinction between a command economy and a country that understands it’s not just floating through time, but rather a growing organism that requires a path or strategy to move forward, grow, survive, and improve life. Our president's terms are too short for them to really do that. There are some notable exceptions - the moon shot being one. But by and large, we govern on a day-to-day, month-to-month, and sometimes year-to-year basis.
A great example. We were attacked by terrorists in 2001 by a group called the Taliban, holding out and launching terrorist strikes out of Afghanistan. We rightfully responded with overwhelming force. But we were like a dog that caught up with its own tail. What do we do now? The same scenario played out In Iraq. We won, now what? A dynamic and failure that cost far too many lives and enough treasure to rebuild our nation. We went in with purpose; but lacked strategy or a vision of what things should look like when the war was done.
The Marshall plan was a great example of the government looking thru the lens of history and strategy. It was a large-scale, costly, and targeted effort that cost Americans substantial sums, but one that rebuilt Europe (dramatically increasing our trade capacity and alone due to their increase in GDP and our trade with them paid back that Investment) and it also achieved the goal of stopping the advance of communism. I see nothing like that happening now. We talk about China; our military leaders often express concern over an imminent conflict, and we know they are building huge weapon stockpiles and systems - mostly designed to specifically neutralize U.S. assets. But we aren’t doing anything about it. We aren’t forming coalitions at a rapid pace in the pacific. We aren’t increasing our defense budget (in real terms it’s decreased for several years). We aren’t arming key partners like Japan. And while we do nothing,
China is not making that same mistake, it is surging up its supply chains, whether it’s oil from their new friend, Russia, or countless other raw materials found throughout the developing world, from a place we set up perfectly for them - Afghanistan, home to the trillions worth of rare earth minerals - to developing nations up and down the coast of Africa and into its internal under the belt and road initiative. TBRI is a great example of a national strategy that outlines and builds a system for a country to use its strengths - large FX reserves, cheap labor, mass manufacturing, and large financial sector - to advance national interests and long-term strategic goals. Yes, on its face, they were doing humanitarian things. They build infrastructure, power plants, 5G network grids, and seaports. But they did it at several costs. 1. Those projects were picked out by China, implemented by deploying Chinese labor, using Chinese manufacturing components, and financed by, well, China. They also ensure that the next generation of future global communication (5g) is directly In the hands and control of the CCP).
To review in summary, the Chinese build these large infrastructure projects paid for by nations who borrowed Chinese money to pay for them, paid chemise laborers to build them, incorporated comportments only Chinese parts could replace, and enforced communication infrastructure from China to underpin all their projects. China can do whatever it wants to and that includes a strong desire to build massive seaports that dramatically expand China's potential trade with the developing world, while also creating a vast network of deep-water seaports that are, or can be very quickly, naval bases which give them a global footprint on a scale close to only one other, the United States. For all of this, those countries now must pay China back the debt for the trouble. It’s truly a genius state strategy. It accomplished so many goals, it elevates China's standing in a big way, left a heavy influence in developing regions such as central Africa, and expanded its international infrastructure for both peace and warfare. And they did all this by lending huge amounts of FX reserves - made possible by the insatiable U.S. consumer - that will likely be paid back + interest, or at worst case, fall into Chinese ownership - which is already effectively the case, that would Just formalize it. The United States needs to start thinking like this. With our two-party system and rapid election timeline, it’s very hard for the people or leaders to focus on what needs to be done for a decade or two from now, and if it has a cost, forget about it as it won’t be touched until it’s on the brink of catastrophe.
An example of an American policy that was designed on a short-term basis, but eventually become a long-standing tenant of the American system, yet today is still haunted by the specter of no guaranteed overruling strategy regarding its existence. I will leave you with that: Social Security. A wonderful silver lining came out of the Great Depression. At first, it was meant to be temporary, but I’m time it was realized the important role it played in providing dignity and support to our fellow retired countrymen and disabled laborers. However, like anything important, it has substantial costs. We (well, pretty much most people) all agree that the program can’t be shut down, that we can’t reduce benefits to seniors - especially when unofficial inflation is far higher than the COLA rate used - and the idea of raising the age is deeply unpopular (I see merits and issues with this, personally no opinion on it yet until I learn more), and any other idea, including privatization, is dismissed out of hand. But we all know social security is on borrowed time. The number of times I’ve heard someone say I hate paying this because we all know it’s going to be out of money by the time I qualify. This is true, in part. As it stands, the system will no longer be able to make payments in the not-terribly-distant future (2034). So why on earth is this issue not being addressed now? Because it’s politically unpopular? That’s outrageous to me. In typical fashion, are we just going to wait until 12/31/2033 to pass legislation to save the day? The way we operate, I wouldn’t be shocked. But with such a long runway, and such support for a supportive system for seniors, why can’t lawmakers sit down and come up with some solution that makes everyone happy while making financial sense? The reality is that the population is aging, fewer people are working at younger ages (something that I think rapidly increases with the adoption of AI and robotics), and people are retiring sooner, yet living longer lives. So, there is a structural issue there. SS depends on young labor to pay into a fund that then distributes to nonlabor seniors, all of which is calculated based on average mortality. Well, less young labor, more nonlabor seniors, longer life spaces. So, the core mechanics need to be revisited in some way, and I am open to all ideas at this point, I just ask we don’t wait until the 2030s. This was all a long-winded way of showing and exposing actions of the government that show there is a dramatic shortage of vision, and courage to tackle issues that may be unpopular in the short term yet crucial in the long term, and that our short political cycle reinforces those elements and makes large scale, significant change and improvement nearly impossible.
The last example I will point to, the largest failure outside of the Iraq war in the 2000s is the failure by 3.5 presidents to recognize the importance and strategic significance of semiconductors. The first few years of the 2000s are forgivable to a degree, but by 2007, when the iPhone was released and it was clear we would all have computers in our pockets in the near future, national leaders should have recognized this and acted on it, doing everything in their power to ensure that the United States is home to the best, word class chip design industry, as well as home to the largest semiconductor manufacturing ecosystem in the world. If you are wondering if not us, who does have that status? China and a territory, Taiwan, that China claims and will likely try to retake, through invasion or blockade, in the coming decade. About 95% Of the world’s chips come from those two countries, and one is hardly a friendly or fair geopolitical actor. The other is under constant threat of military aggression. If the US and China have an escalation, even just a very warm Cold War, or if Taiwan is invaded/blockaded, the world will completely stop operating the way we have grown accustomed to over the last 100 years. There will be essentially no new semiconductors for manufacturing anything. That means no iPhones, no computers, no modems - which means no internet, no cameras, no TVs, no cars, no fridges, basically no anything that is even somewhat “smart.”
The fact we are this vulnerable and in such a fragile Position is a damming commentary on the West’s foresight, strategic thinking, and political priorities. So where along the way, the West seemed to have forgotten that the world is a dangerous place, even today and that for many, what we consider poverty in our developed nations pales in comparison to the poverty experienced in the undeveloped world, where governments rise and crumble all the time, where bank account ownership is virtually impossible (600m Africans don’t have a checking account), and food and water is not a guarantee on any given day. All that said, I lay the most emphasis of my blame at the feet of the US presidents and their administrations. I don’t expect individual presidents to understand or see these things, that’s now how they became presidents, or why they become presidents. They become presidents because they know how to market themselves, determine the policies they think will resonate the best, and paint them together in the most eloquent way possible. Once they have the job, they are there to make high-level decisions based on data provided by many thousands of analysts and many outside friends and advisors who provide counsel. Those are the people I take issue with.
The fact that no one picked up the phone “Mr. Bush (Obama, Trump), these computers are really becoming a big deal; more so than we ever anticipated. Right now, we sure make a lot of them and the best software is made in America, but China sure does have a massive manufacturing advantage when it comes to fabricating these chips. That’s something we can’t sit back and watch, we need to not just match, but outbuild their chip industrial base, and we need to do it quickly, or we will never catch up. They could turn the lights off on us without firing a shot Mr. President. Let’s get to work on this, tomorrow, and don’t let cost get in the way. We have plenty of ways to finance and fund the type of infrastructure projects we’re talking about. If we could build the first nuclear weapon for 92bn dollars, or even the cost of our entire nuclear activity from the 40s to 2000s for $5.5 Trillion, I think we can mentally come to terms with spending a few hundred billion winning the next Manhattan project race. I call it a Manhattan project, because that’s how urgent it is, and the country that ultimately dominates space will have the same leverage that the first country with a nuclear weapon had. Please, put a team together, commit $500bn to this, and let’s get America back into the game.”