Does it make sense to create a new sovereign wealth fund on borrowed dollars?

That seems to be Prime Minister Mark Carney’s plan. Ahead of last week’s spring economic update, Carney announced plans to create a “Canada Strong Fund,” with an initial federal contribution of $25 billion.

JAY GOLDBERG: Liberals’ sovereign wealth fund is just a massive pile of new debt Back to video

A sovereign wealth fund is a state-owned investment fund that normally uses government surplus reserves to invest in financial assets, such as stocks and bonds, and is independently financially managed. Alberta has such a fund, called the Alberta Heritage Savings Trust Fund, which was established some 50 years ago.

The new Canada Strong Fund will, according to Carney, “focus on investing in Canada.” In other words, the federal government already plans to direct this fund, or at least strongly guide it, in terms of where to invest.

That should raise an immediate red flag for taxpayers. Sovereign wealth funds are generally designed to get the most bang for the taxpayer’s buck and are arm’s length for that very reason. Most countries, like Norway, also........

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