When things start unraveling, they unravel, and not in predictable ways.

One corollary of Donald Trump’s attempt to build a more self-sufficient (as he misinterprets that term) America will be that foreigners will be less willing to invest in this country (something I touched on here). This is not least because the previously negligible political risk premium on investment in the U.S. will now be quite a bit higher, and it’s likely to remain so until the next presidential election and, indeed, quite possibly beyond — even if Trump can bring himself to get off his high, if nastily spavined, horse before much more damage is done. Who knows what the political reaction to the current shambles will be, and what form it will take? Only an optimist (count me out) would think it will necessarily be benign.

Ian Harnett, for the Financial Times:

International ownership of US equities has risen almost continuously over the past 20 years (and is now 18 per cent of US market capitalisation). A strategic decision by international investors to repatriate funds in retaliation against US trade actions, or simply to pay for increased defence spending, could result in an equity sell-off that could impose significant negative US wealth effects.

When things start unraveling, they unravel, and not in predictable ways.

Harnett:

America’s vulnerability to retribution and repatriation highlights how a world of “self-sufficient production” is likely to see a shift towards “self sufficient capital”. This may be why the US Administration is rapidly pushing ahead with its sovereign wealth fund. A large-scale privatisation programme, alongside the sale of government-owned land, could easily see the US fund become larger than the Norges Bank’s $1.8tn. This pool of capital could help offset the loss of access to global funds, and support nascent US businesses and key strategic industries.

Both the Biden and current Trump administrations have studied or announced studies into a potential U.S. sovereign wealth fund. As Dominic Pino explained in February, it’s a bad idea, which would see too much money put into the hands of Washington, D.C.:

The potential for cronyism with a sovereign wealth fund is dizzying, and the record of current government efforts to direct investment should not give anyone confidence that it would be competently or fairly managed.

Dominic is being uncharacteristically gentle. Such a sovereign wealth fund would be a cesspit, a slush fund on a gigantic scale. There are one or two decent sovereign wealth funds. Singapore has one, Norway has two. The Norwegian duo, both funded by the country’s oil revenues, have the long-term goal of providing a nest egg to ensure Norway’s future when the oil runs out. The funds do not invest in Norwegian companies (partly because of the small size of the Norwegian economy and vulnerabilities — the danger of “Dutch disease” — that could flow from that) and can only contribute a strictly limited amount to the state budget. I suspect that the capacity for such self-discipline does not exist in Washington.

So, yes, sell off some of the government’s vast landholdings and other assets, but apply the funds to paying off some of the national debt.