Setting aside the sheer logistical impossibility of financing the federal government through tariffs alone, it is unclear what exactly would be achieved.
but how is this different than some hedge fund or bank using money the government didn’t have but still spent, using that money to invest into something? Because as I understand it, sovereign wealth funds are just the govt investing into stuff that has a long term gain
If its not immediately clear to someonr, here is an explanation.
We all know the government borrows money right? Well the moment the government becomes an operator in the market, the market will lose faith in the stability of the government. When that happens interest rates on US debt skyrocket and its no longer possible to make more money than it costs to borrow.
It would blow up our debt immensely. Let’s say the current T bill rate is 4% and you can somehow funnel a Trillion dollars into your sovereign wealth fund. Let’s say you trade with it and do great, an awesome 15% return. That’s an extra 150B, cool right? Well now remember that the market will demand higher rates on T-bills, and let’s say it goes up only 2% to 6%. Well that means you ate now paying an extra 2% on the 36T in debt you have to continually refinance. Meaning you lost 720 Billion to make 150 Billion.
but how is this different than some hedge fund or bank using money the government didn’t have but still spent, using that money to invest into something? Because as I understand it, sovereign wealth funds are just the govt investing into stuff that has a long term gain
There’s not much difference, but we can still agree that the example you gave are not exactly a sustainable way to grow, right?
If its not immediately clear to someonr, here is an explanation.
We all know the government borrows money right? Well the moment the government becomes an operator in the market, the market will lose faith in the stability of the government. When that happens interest rates on US debt skyrocket and its no longer possible to make more money than it costs to borrow.
It would blow up our debt immensely. Let’s say the current T bill rate is 4% and you can somehow funnel a Trillion dollars into your sovereign wealth fund. Let’s say you trade with it and do great, an awesome 15% return. That’s an extra 150B, cool right? Well now remember that the market will demand higher rates on T-bills, and let’s say it goes up only 2% to 6%. Well that means you ate now paying an extra 2% on the 36T in debt you have to continually refinance. Meaning you lost 720 Billion to make 150 Billion.