Canada is Getting a Sovereign Wealth Fund

[CursedMutantSoul]

Looks like Canada is ascending into a top-tier nation as we speak. They really are revamping their industry, public finances, and way of doing things. Now they're getting a sovereign wealth fund to build up their national wealth.

 

[plplp5]

Looks like Canada is ascending into a top-tier nation as we speak. They really are revamping their industry, public finances, and way of doing things. Now they're getting a sovereign wealth fund to build up their national wealth.

Unfortunately Canada has been running budget deficits since 2008, and their debt to gdp ratio is around 110%, so even if they create a sovereign wealth fund it would most likely be funded with debt and not budget surpluses like Singapore or Norway. This is equivalent to taking out a loan (aka money you don’t have) to invest and hoping it works out.

 

[CursedMutantSoul]

Unfortunately Canada has been running budget deficits since 2008, and their debt to gdp ratio is around 110%, so even if they create a sovereign wealth fund it would most likely be funded with debt and not budget surpluses like Singapore or Norway. This is equivalent to taking out a loan (aka money you don’t have) to invest and hoping it works out.

And that isn't a bad idea when Canada can borrow at 2.5% nominal interest rate (which is about 0.5% real interest rate) and invest it in productive assets. Borrowing to invest isn't a bad idea in and of itself. If the SWF generates more in returns than the cost of the debt, it will be a net gain for the country.

 

[plplp5]

And that isn't a bad idea when Canada can borrow at 2.5% nominal interest rate (which is about 0.5% real interest rate) and invest it in productive assets. Borrowing to invest isn't a bad idea in and of itself. If the SWF generates more in returns than the cost of the debt, it will be a net gain for the country.

True.

Anyways I just realized that Canada has the 4th biggest oil reserves, mainly from Alberta's oil sands. Maybe if the Canadian government invested more into extracting and refining as much oil as possible, charged royalties on oil sales (for private oil companies) and then allocated the tax revenue into the SWF (basically what Norway did), they would be multiple times richer. Crazy how Canada is basically sitting on a gold mine and yet they just let oil companies extract their oil without charging them any royalties, pretty much letting them profit from their natural resources for free.