Socialism with American Characteristics
America spent 250 years insisting the state had no business owning the means of production. It is marking the anniversary by buying them.
The most consequential financial event of this year was not a rate decision, nor a two-trillion-dollar rocket clearing the launchpad. It was quieter than either. Over the past twelve months the government of the United States has become a shareholder — in a chipmaker, a rare-earth miner, a lithium producer, and, if a proposal floated this month goes anywhere, in the country’s leading artificial-intelligence laboratories. The invisible hand, at 250, has opened a brokerage account.
The footprints are not hard to follow. A February executive order asked the Treasury and Commerce to design a sovereign wealth fund and “monetise the asset side of the US balance sheet”; the formal vehicle promptly ran aground on the awkward fact that a pooled fund requires an act of Congress. So the thing is being built without one, deal by deal. A golden share in US Steel. A fifteen per cent stake in MP Materials, its price floor set near twice the prevailing Chinese one, making the Pentagon the miner’s largest owner. Ten per cent of Intel, converted from grants, making Washington its biggest shareholder too. Slices of Lithium Americas and Trilogy Metals. A fifteen per cent cut of Nvidia’s and AMD’s China revenues, later a quarter on the flagship chip. And, days ago, OpenAI’s suggestion that it gift the government five per cent of itself — the other laboratories invited to match — through what it calls a “public wealth fund”. One newspaper has already observed, without evident irony, that Uncle Sam is outperforming the S&P 500.
Exhibit 1 · US government equity moves, 2025–26
Three doors open once a state resolves to own equities, and the administration seems interested in all three. The first is the bond market. Kevin Warsh, the new Federal Reserve chairman, has noted that 175 basis points of cuts since 2024 somehow raised long yields rather than lowering them — a verdict on the Fed’s credibility as much as its arithmetic. A balance sheet willing to buy Treasuries and equities is a buyer of last resort in waiting, a means of pinning the long end and the stock market without troubling anyone with the word easing. The second door is politics. An economy in which the owners of assets prosper while everyone else spectates is the raw material of populism; a fund that hands the public a stake is redistribution in the respectable suit of investment — gentler than Senator Sanders’s proposed half of AI firms to be handed over and far gentler than a wealth tax. The President has already called it “almost a partnership with the American public”. The third door is China, which has funnelled state capital into semiconductors and rare earths for fifteen years and, in the latter, simply won. The stakes in MP Materials and Intel are the belated American reply: national security, filed under portfolio management.
None of this is unprecedented; it is merely un-American. Norway operates the model everyone admires and Washington is conspicuously ignoring — a passive index fund of the world’s stocks, invested only abroad, kept for the grandchildren. Japan supplies the nearer template: the Bank of Japan bought exchange-traded funds until it became the largest owner of the nation’s blue chips, and Tokyo now wonders aloud about handing them to citizens — the public wealth fund, reached from the opposite direction. Switzerland’s central bank, staffed by hard-money men, became a whale in American technology almost by accident. And China’s “national team” has waded into its own falling market often enough to make the move routine. The United States is assembling a composite of the four: Norway’s ambition, China’s strategy, Japan’s mechanism, and a politics all its own.
Exhibit 2 · major state investment vehicles by assets
It is not, one suspects, an accident that the Treasury and the Fed are now run by former hedge-fund managers who breakfast together weekly. Scott Bessent wants to monetise the asset side and maintains that a strong dollar need not wait on high rates. Warsh, the self-described balance-sheet hawk who once opposed quantitative easing because printing money “erodes purchasing power”, has scrapped forward guidance and the dot plot and speaks of shrinking the balance sheet. The arrangement is subtler than it appears: Warsh’s reputation for rectitude is exactly what permits the fiscal machine to support asset prices without a revolt in the bond market. He plays the dollar’s defence counsel while the Treasury quietly goes long. That Larry Ellison has geared Oracle to the hilt to build data centres for OpenAI is the conduct of a man who has been assured the house will cover his losses.
The charitable reading deserves its hearing. The stakes are genuinely strategic; the public genuinely merits a share of whatever the boom throws off; and Warsh may sincerely believe that artificial intelligence will supply the productivity to square the circle. Not every coincidence is a conspiracy. But intentions do not govern consequences, and the consequence here is inflation.
A state that underwrites both equities and the long end is monetising risk under a kinder name. The next crisis will demand a response several orders of magnitude beyond 2008 or 2020, because markets have grown too large, too levered and too collateralised to be allowed to fall — and the leverage tower now rising around the AI build-out, financed to the point where banks are quietly shuffling the risk off their books, is as good a candidate as any for setting it off. The distance between a public wealth fund and a printing press is a credible central bank, which is precisely why Warsh must narrate the opposite of what his breakfast companion is doing. Gold above $5,400 and the dollar’s reserve share at its lowest since 1993 are already keeping the score. Control of energy choke points such as Hormuz and Panama, speak as much to continuing to control global trade and more specifically, mandating it is transacted in US Dollars.
For portfolios the implication is uncomfortable but consistent. A state bid is a formidable floor under American equities — but a selective one: the strategic sectors (chips, critical minerals, AI infrastructure, power, the grid, defence) collect the premium, while the rest collect the debasement. That’s not to say that a post US mid term escalation of hostilities in the Middle East can be neutered. Long-duration government bonds are to be faded rather than held, for a fund that caps yields does so at the currency’s expense. And the oldest hedge becomes the newest — real assets over nominal claims — because the physicalisation of artificial intelligence and the debasement of money are, in the end, the same trade. The exorbitant privilege is being spent at last, and the invoice is written in purchasing power. The invisible hand, it turns out, was only ever waiting for an appropriations line.
For professional and internal use only. Figures and positioning are illustrative and subject to Investment Committee confirmation. Not investment advice.
