SWF (Sovereign Wealth Fund) – Part 1


The New Economic Model and the practice of private-public partnership through the implementation of MMT (Modern Monetary Theory) to empower the local economy by providing fund instruments for SMEs (Small Medium Enterprises) within my thesis and the implementation of MMT, we will talk about the following topics :

– SWF (Sovereign Wealth Fund), We will talk about why SWF is the right model to fund a country independently without a debt, especially a country that has a lot of natural resources.

– Printing Money without needing to get a loan from other countries or financial global institutions such as IMF. and how printing money can be used to build Static and Dynamic infrastructure for the country’s long-term development strategy.

– Consolidating Bottom of the (economic) Pyramid (BOP)

– Equity Crowd Funding and Local Stock Exchanges built for SMEs

– How to get out of the trap as middle income trapped country through the implementation of MMT and creating different fund instruments to empower local businesses without a debt.

As we know these famous sayings: Control oil, you control the country, Control food, you control people, Control gold you control the world, but why gold? let’s go back to history a little bit. Since ancient times, gold and silver have been used as the trading tool to do the transaction.

Paper money was developed first by the Chinese, who used stag skins, bark, or parchment marked with the imperial seal as “bills of payment.” The penalty for counterfeiting was death.Paper money had trouble gaining acceptance in Europe. Leather money was used around 1100, but only as a temporary substitute when silver supplies ran low. A Swedish bank issued paper money in 1661, but they eventually flooded the market with it, and it lost its value.

The use of paper money really caught on in Europe in the 1700s, when the official bank of the French government began issuing paper money. The idea came from goldsmiths, who often gave people bills of receipt for their gold. The bills could be exchanged for gold at a later date. That’s an important fact in the development of paper money because it means that the money represented a real amount of gold or silver that actually existed somewhere. A piece of money was actually a promise from the institution that issued it (either a government or a bank) that the institution would give the holder of the bill a certain amount of gold or silver from its stockpile whenever he wanted it. Under this kind of system, the money is said to be “backed by gold.” With a few temporary exceptions, during wars or other emergencies, all currency in the world was backed by a real supply of precious metal until 1971.

Let’s talk about world domination, there are several strategies of world domination, but this time let’s talk about the 3 first such as military domination, currency domination, trade domination.

military domination has been dominated by America, currency domination has been dominated by America, and currently, the trade domination has been dominated by ChinaSince August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard, the US can print money out of thin air. August 15, 1971, marked a major turning point in monetary history.

President Richard Nixon’s decision to suspend dollar convertibility increased monetary sovereignty to the United States, forever changing the nature of the relevant constraint on federal spending. Under the Bretton Woods system, the federal budget had to be fairly tightly controlled to protect the nation’s gold reserves.

Today, we have purely fiat currency. That means the US government no longer promises to convert dollars into gold, which means it can issue more dollars without worrying that it could run out of the gold that once backed up the dollar. With a fiat currency, it’s impossible for the US to run out of money. but why other countries can’t just print money out of thin air without the US dollar as the underlying? as we know that history would be re-written by the winner of world war, Before World War II, all global currencies were backed by gold, and each government guaranteed that its money was good for a certain amount of gold. Then came the Bretton Woods agreement of 1944, which created the World Bank and the International Monetary Fund (IMF), and also established the U.S. dollar as the new gold. (The U.S. held most of the world’s gold supply) ok enough talking about history now, we will talk about the history of money at another time later.

can we other countries print money without gold as the backup? what if there is a country that has anything other than just gold as natural resources? And what about if we have minerals, nickel, and other precious metals, and rare earth elements that can be useful for the development of future technology? now let’s talk about topic number one which is SWF (Sovereign Wealth Fund), why SWF is so useful as one of the fund instruments for the countries that have a lot of natural resources as its reserve? what is SWF? according to Wikipedia A sovereign wealth fund (SWF), sovereign investment fund, or social wealth fund is a state-owned investment fund that invests in real and financial assets such as stocks, bonds, real estate, precious metals, or in alternative investments such as private equity fund or hedge funds.

another reference by Investopedia, A sovereign wealth fund (SWF) is a state-owned investment fund or entity which comprises pools of money derived from a country’s reserves. Reserves are funds set aside for investment to benefit the country’s economy and its citizens. The funding for an SWF comes from central bank reserves which accumulate because of budget and trade surpluses, official foreign currency operations, money from privatizations, governmental transfer payments, and revenue generated from the exporting of natural resources.

a country with natural resources as its reserve can be the money creator, money creation can be backed by natural resources and productive projects like what China has been doing for the last decades, a country can issue national treasury and government bonds based on its natural resources to create/print money and to get the US dollar as its foreign reserve to be able to do international trade. Now the question is, how do we implement SWF not only in a country that has natural resources but also in a country that has no natural resources?How do we implement SWF and print money with productive projects as its underlying? how can we avoid inflation if we print money? and how to balance between producers’ and consumers’ power? To be continued…