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.