| Similarly, I don’t see the appeal of a sovereign wealth fund for the U.S. We’re already sort of in this business: state and local pension funds are like mini-sovereign wealth funds. The investment sides of those operations are mostly pretty satisfactory, but problems arise when governments count on high expected returns on equity as a justification to incur fixed multi-year obligations.
I see lots of risks from the federal government getting into this game (what promises might it make on the back of expected stock returns?) and few benefits. I think Barro’s analysis here is lacking. First, the appeal of a sovereign wealth fund is pretty straightforward. It is a way for the state to passively capture capital income and spread it out to the public as a whole...............................................Full Article: Source |