Wouldn't starting up a sovereign wealth fund under these circumstances actually increase the country's debt burden, since it would divert funds away from debt repayment, hoping that returns will exceed debt servicing costs? According to the Peter G Peterson Foundations (citing the CBO), the CBO projects that interest payments will total …
Wouldn't starting up a sovereign wealth fund under these circumstances actually increase the country's debt burden, since it would divert funds away from debt repayment, hoping that returns will exceed debt servicing costs? According to the Peter G Peterson Foundations (citing the CBO), the CBO projects that interest payments will total $892 billion in fiscal year 2024 and rise rapidly...climbing from $1 trillion in 2025 to $1.7 trillion in 2034. In total, net interest payments will total $12.9 trillion over the next decade. I'd love to invest in a fund that could perform positive at even a fraction of that rate.
The payments go up because the debt it is based on goes up. It is not a particularly high return performance for holders of govt debt..
Regardless, the piece mentions leveraging. If investment returns (stock, bond, real estate, etc.) are greater than the added debt interest, profit is gained. I have a mortgage at 2 1/8% I took out shortly before my old mortgage was paid off. I could pay it off but I am making profit on it.
Wouldn't starting up a sovereign wealth fund under these circumstances actually increase the country's debt burden, since it would divert funds away from debt repayment, hoping that returns will exceed debt servicing costs? According to the Peter G Peterson Foundations (citing the CBO), the CBO projects that interest payments will total $892 billion in fiscal year 2024 and rise rapidly...climbing from $1 trillion in 2025 to $1.7 trillion in 2034. In total, net interest payments will total $12.9 trillion over the next decade. I'd love to invest in a fund that could perform positive at even a fraction of that rate.
Exactly - “If investment returns…are greater than the added debt interest, profit is gained.” Big if.
The payments go up because the debt it is based on goes up. It is not a particularly high return performance for holders of govt debt..
Regardless, the piece mentions leveraging. If investment returns (stock, bond, real estate, etc.) are greater than the added debt interest, profit is gained. I have a mortgage at 2 1/8% I took out shortly before my old mortgage was paid off. I could pay it off but I am making profit on it.