Federal Capitalism
MP Mining & Intel, Sovereign Wealth Funds, & the Mar-A-Lago Accords
Post-WWII propaganda and popular, low-resolution debates have distorted the true nature of American political economy. Left and right commentariat would lead one to believe that the US has always been a maximally free trading, free wheeling, market economy wisely guided (or cruelly crushed) by the Invisible Hand. This has never been the case and never will be. It’s time to puke up this ideological slop, wipe your mouth off, and digest a proper perspective.
It’s more accurate to say the US has held deep respect for property law, as developed by the English common law tradition, and extended the Anglo-Dutch financial-commercial model. The US has always had a robust and dynamic private sphere. The public sphere has never tried to abolish or fully dominate it but it does support, partner with, and heavily regulate portions of it that it deems critically important.
The Federal Government and the States, sometimes on their own and sometimes in conjunction, have been critical infrastructure for and partners with Mr. Market. Mr Market knows he rests on the orderly and stable foundation the State provides and secures. The State knows technological innovation as well as dynamic commercial and industrial activity, provided by a healthy and vital Mr Market is essential to a strong State with a high capacity factor.
The proper and deep discussions have never centered around binary signifiers or rigid dichotomies. The fruitful debates, are often hashed out by operators, not prognosticators, in places like the Office of Strategic Capital, trying to accomplish something real, not ideal.
MP Mining & Intel
Armories, arsenals, ship yards, railroad & telegraph infrastructure, nuclear energy, computing, aerospace, and many others, too numerous to name, have been and in some cases, still are, strategic priorities of the USG. As far as the DoD is concerned, the domestic production of rare earth elements and semiconductors are now in the same “critical” category. And they’re correct. Hence the recent MP Mining & Intel deals. Keep in mind, the Intel deal turned funds already earmarked for Intel, under the CHIPs Act, into equity. Instead of accumulating fuzzy, indirect benefits, USG, and taxpayers by proxy, at least get direct, upside exposure.
Yes, this is government intervention. No, this is not controlling the means of production. Yes, this is necessary.
Reject ideology. Embrace problem solving. Make peace with necessity.
Critical areas of the American private sector, “the market”, have been, relatively, left on their own during a long period of strategic amnesia and hegemonic arrogance. That era is coming to an end.
Our private sector is the envy of the world but this is not a fair fight. Expecting our companies in critical industries to withstand an all out economic assault from State(s), at the scale of China and others, is unrealistic. The CCP and its SOEs are not bounded by the typical behavioral and capital constraints of a US corporation. They will fund massive “losses” through government budgets in perpetuity and rubber-stamp large, low-interest loans as long as they think it is strengthening their strategic interests. A US company sitting in the eye of this storm has no chance to “compete” over the span of a few five year plans. And investors, rightfully so, don’t want to deploy large amounts of capital with this large asymmetry hanging over them like an economic sword of Damocules. Institutional investors are just not that into anxiety and martyrdom.
US Sovereign Wealth Fund
These deals are not surprising given the oceanic currents driving US policy. The bipartisan passage of the CHIPs Act during the highly partisan Biden Admin, as well as the recent Sovereign Wealth Fund (SWF) EO from the Trump Admin, portended these types of assertive, direct interventions.
At this time, we don’t know the exact recommendations that’ll be made by Secretary Bessent and Secretary Lutnick but it's not unreasonable to assume that their proposal will be similar to what already exists.
Today’s SWFs have evolved beyond their traditional role as merely large institutional investors safeguarding national surpluses. They’ve also become strategic actors, financing critical industries and infrastructure in their own economies. Recently, they’ve even directly issued securities.
In October 2022, the Public Investment Fund (PIF), Saudi Arabia’s SWF, issued $3 billion in unsecured bonds on the London Stock Exchange. The proceeds are intended to finance or refinance eligible green projects in line with PIF's Green Finance Framework, which supports the broader goals of Saudi Arabia's economic diversification program known as "Vision 2030."
In 2024, EIH, Ethiopia’s SWF, played a foundational role in establishing the Ethiopian Securities Exchange (ESX). EIH is planning to divest some state owned enterprises and issue stakes in its portfolio companies on the ESX, through public offerings.
In our own back yard, in 2018, Alaska’s Permanent Fund allocated some of its capital to the Alaska Investment Program. The program was designed to diversify the economy, improve domestic infrastructure, and invest in strategic industries important to Alaska’s future.
USG is on course to act similarly to the examples given above. A US SWF won’t just be a passive holder of a large, diversified portfolio but will be an active, strategic actor directing its own capital towards USG’s priorities as well make the math work for more private capital to comfortably deploy in the same direction.
The GENIUS Mar-a-lago Accords
The Mar-a-lago Accords are not officially a “real” thing. Nonetheless, the restructuring of the global financial system is very real. And the US, under the reign of The Don of Mar-a-lago, is getting ahead of the tectonic shifts in the global system.
The recent GENIUS Act is only one leg of this multi-faceted strategy but worth zooming in on. The legislation should be looked at as a cheap insurance policy and a massive, zero-cost, distribution channel.
The admin wants to make US industrial output more competitive within and abroad. One way of doing this is through a relative weakening of the dollar. Foreign demand for Treasuries has been weakening for years and as well USD’s share of global commerce. Tariffs also help reduce demand for both. The administration is ok with this but magnitudes matter. If these decreases in demand for Treasuries and dollars are too sharp, interest rates and inflation can spike, simultaneously, leaving the government and the average citizen in a precarious position. The GENIUS Act provides a strong, countervailing force to weakening foreign demand for Treasuries while also positioning the dollar to continue and even increase its global commercial dominance in a more bottom up fashion.
It does this by formalizing Treasury market access and giving its blessing to a new, large, hungry, and growing bidder for US Treasuries, stablecoin issuers, who in turn spread digital dollars to all corners of the Earth at no marginal cost to USG. The admin gets to maintain US Treasuries as the global reserve asset and the US Dollar as the preferred, global medium of exchange for the immediate future. A winning combo, only the chronically wrong can hate.
In addition, the proposed CLARITY Act and the Strategic Bitcoin Reserve (SBR) position the US private and public sector for success in an eventual world that has moved further away form dollar dependence and dominance.
The US has its issues but two things it is absolutely dominant in is producing great software at scale and providing the world with the most liquid, dynamic, and fair financial markets in the world. Bitcoin and the digital asset ecosystem sit at the nexus of these two strategic advantages. The US private and public sector hold a significant proportion of the cap table of Bitcoin and many other major crypto-assets while also hosting a lot of human, corporate, and physical infrastructure these networks run on. The strategic opportunity for the US here is beyond obvious.
How do you stave off disruption, usurpation, and irrelevance? You disrupt yourself before someone else does it for you.
Like almost all critical industries and resources, the new monetary regime will continue as an American Public Private Partnership (PPP) but through a new medium.
Federal Capitalism
State Capitalism. Mixed Economy. Managed Economy. National Socialism. Social Market Economy. Corporatism. Mercantilism. Distributism.
The emphasis and specifics differ between these but all overlap on the same truth: the intersection and interplay of public and private spheres is necessary. The closest modern humanity has come to a “pure” anything was early Soviet and Chinese Communism. These were disasters. Both, after millions of unnecessary deaths, eventually bent the knee to the need for domestic and global markets.
US political economy has always been “mixed” like the others named, but has a strong and healthy bias towards the private sphere handling as much as possible. We generally don’t like government intervention. This is good. But confusing the platonic ideal of “free market capitalism” with the United States is to seriously misunderstand what the US political economy has actually been.
Although not officially recognized, “Federal Capitalism” encapsulates US political economy with a pithy phrase. Federalism, as an organizing principle, has two general aspects: limits and multilateralism. Power, ownership, and responsibility is divided, distributed, and limited among a large group of stakeholders.
Welcome to the new normal, the same as the old normal, but different.