Suppose I came to you and said: “I would like to borrow a very large sum of money in order to buy massively overpriced shares. By the way, I am already drowning in debt.” What interest rate would you charge me?
The answer would be either prohibitively high or a flat refusal.
Yet this is precisely the course the United States government has embarked upon.
The Intel Purchase: A Costly First Step
Only days ago Washington acquired around ten per cent of Intel, spending close to nine billion dollars by converting subsidies from the CHIPS and Science Act into equity. The US Treasury now holds more than four hundred million non voting shares at roughly twenty dollars each.
Markets offered a modest applause, with Intel’s share price ticking higher. But the company remains far below its past peaks and management has already warned that government ownership could complicate global sales.
Officials present this move as the foundation of a new American sovereign wealth fund. The difference from Norway is obvious. Norway’s fund is backed by oil revenues. The United States has no such cushion of accumulated wealth, only mounting debt.
Next Target: Defence Contractors
US Commerce Secretary Howard Lutnick has confirmed that the administration is considering taking direct equity stakes in Lockheed Martin, Boeing and Palantir. His rationale is that defence contracting has become a giveaway and that taxpayers deserve equity in return for financing the industrial base.
It sounds like logic. In practice it risks transforming the United States government into both regulator and shareholder of strategic industries. To many observers that is not market capitalism but a slide into state capitalism or what I have called ‘Red hat socialism‘
Palantir’s Extraordinary Valuation
The inclusion of Palantir Technologies makes this strategy especially alarming. Palantir’s price to earnings ratio currently sits somewhere between five hundred and seven hundred times trailing earnings. Even forward estimates remain stratospheric, around two hundred to three hundred times earnings.
To put that in context, the S&P 500 trades at about twenty two times earnings. Palantir is thus one of the most richly valued large cap stocks in the world. For any rational investor it represents significant downside risk. For a government already weighed down by record deficits it borders on financial recklessness.
The Risk Cascade
If the US government continues down this path, the sequence of risks is straightforward. Overvalued markets always correct. When that correction comes, Washington will book enormous losses directly onto the public balance sheet.
A political leader faced with such an outcome may not accept failure. Instead President Trump could choose to double down by buying even more equity, perhaps in weaker or more speculative firms. It would be the gambler’s fallacy applied to fiscal policy.
As this desperation becomes visible, confidence in US Treasuries may fracture. Investors would start to wonder whether the American government is a sovereign borrower or a speculative hedge fund. The response would be simple. Yields would climb as bondholders demanded higher compensation for risk.
Higher borrowing costs would arrive just as debt levels are exploding. Mortgages, corporate credit and municipal borrowing would all become more expensive. Financial conditions would tighten dramatically and growth would stall. Rising interest costs would in turn swell the deficit, fuelling perceptions of fiscal irresponsibility and intensifying the pressure on both equities and bonds.
This is how a misguided equity gamble could spill over into a sovereign debt crisis made in America.
Argentina, Not Norway
A genuine sovereign wealth fund requires wealth. Norway built its fund on decades of oil revenues. The US by contrast is building what amounts to a sovereign kamikaze fund, financed not by surpluses but by debt and managed not with prudence but with political bravado.
In this sense the US increasingly resembles Argentina under Juan Perón, where populism, intervention and debt blended into a destructive mix.
The real danger is not only that Washington loses taxpayer money on overpriced equities. The greater risk is that such policies undermine trust in US Treasuries, the bedrock of the global financial system. If desperation drives the administration into doubling down on failed bets, America could face spiralling bond yields, collapsing market confidence and a fiscal crisis of its own making.
