Time For A U.S. Infrastructure Fund (USIF)
If we're lucky, Elon Musk's Department of Government Efficiency significantly reduce America's fiscal deficit from the cost side, and President Trump's tariffs will reduce it from the revenue side. As long as we are still running fiscal deficits though, our federal debt will continue to grow.
One proposal mooted to sort of reduce the debt is to replace some of it with non-marketable, century bonds, as Jim Bianco mentions below.
5/16
— Jim Bianco (@biancoresearch) February 22, 2025
Enther MALA pic.twitter.com/e8rAa8lXHD
Here is what we think is a better proposal: let bondholders convert some of their Treasury bonds into shares of a U.S. infrastructure fund.
I. Executive Summary
The U.S. national debt has exceeded $34 trillion, with annual interest payments approaching $1.2 trillion.
Rising debt and inflation fears increase Treasury yields, further exacerbating the fiscal burden.
This proposal establishes a U.S. Infrastructure Fund (USIF) to allow Treasury bondholders to exchange bonds for equity in a revenue-generating infrastructure fund.
USIF will take equity stakes in infrastructure projects in return for providing insurance or reinsurance, regulatory assistance, tax abatement, and other government-backed incentives.
An international expansion of USIF could further increase its impact by financing joint infrastructure projects with global partners, promoting economic interdependence and geopolitical stability.
II. The Debt Problem & Why USIF is Needed
A. The Growing Debt Burden
Total U.S. debt: ~$34 trillion
Publicly held debt: ~$26 trillion
Annual interest payments (2024): ~$1.2 trillion (largest federal spending category soon)
Projected consequences of inaction:
Higher inflation and interest rates.
Crowding out of productive government spending.
Potential loss of global confidence in U.S. Treasuries.
B. Flaws of Traditional Debt Management Approaches
Higher taxes → Slows economic growth.
Spending cuts → Politically difficult, limited impact on structural debt.
Issuing ultra-long Treasuries (e.g., 100-year bonds) → Only delays debt problems without solving them.
C. The USIF Solution
Convert portions of Treasury debt into equity stakes in a U.S. Infrastructure Fund (USIF).
USIF takes equity stakes in revenue-generating projects (e.g., nuclear power plants, toll roads, ports) in return for insurance, tax abatements, and regulatory assistance.
Bondholders receive inflation-resistant dividends instead of fixed Treasury interest.
III. Structure of the U.S. Infrastructure Fund (USIF)
A. Debt Conversion Mechanism
Treasury bondholders can exchange bonds for an equivalent dollar value of USIF shares.
USIF does not own or operate infrastructure projects but instead takes equity stakes in them in exchange for providing government-backed support.
Dividends from project earnings replace Treasury coupon payments.
B. Eligible Infrastructure Investments
Projected near-term USIF size: $2.5T-$3.5T
Potential debt conversion: 6%-10% of publicly held U.S. debt
Projected annual revenue from USIF projects: $200B-$300B
IV. Financial Impact & Benefits
A. Reduction in U.S. Debt Burden
Debt reduction: If $3.4T (10% of total debt) is converted, it removes $120B in annual interest payments.
New revenue stream for bondholders: Instead of 3.5% Treasury yields, bondholders receive 6%-8% in USIF dividends.
Inflation protection: Unlike fixed-interest Treasuries, USIF dividends increase with inflation.
B. Economic Growth & Productivity Gains
Improved infrastructure boosts GDP through higher efficiency and job creation.
Energy independence via investment in nuclear power and smart grids.
Lower transportation costs via modernized rail, ports, and highways.
Reduces federal reliance on deficit spending.
Unlocks private-sector co-investment in public projects.
Encourages long-term investment over short-term budget band-aids.
V. International Expansion of USIF
A. Why Expand Internationally?
Larger pool of investable projects → Expands USIF capacity from $3T+ to $5T-$7T.
Stronger economic ties with global powers → Reduces geopolitical tensions.
Higher global trade efficiency → Benefits U.S. businesses & consumers.
B. Strategic Joint Infrastructure Projects
C. Government Fiscal Stability
C. Geopolitical & Peace Benefits
Economic interdependence reduces conflict risks.
Aligns major economies on infrastructure goals instead of military confrontations.
Enhances U.S. leadership in global development, countering Chinese economic influence.
VI. Implementation Plan
A. Phase 1: Establish Domestic USIF (~2 years)
B. Phase 2: Expand to International Projects (~3-5 years)
C. Phase 3: Full Integration & Growth (~10 years)
VII. Conclusion: Why This is the Best Path Forward
✅ Addresses U.S. debt crisis without raising taxes or cutting critical programs.
✅ Enhances national infrastructure for long-term economic growth.
✅ Promotes global stability through joint infrastructure investments.
Next Steps
Draft legislative framework for USIF creation.
Secure public-private investment commitments for key projects.
Initiate diplomatic talks for international infrastructure expansion.
Trade Ideas Aligned With This
If you think this sort of approach is likely to happen, here are a couple of trades we've entered recently that are aligned with it.
- A bullish bet on a nuclear energy company.
Click on the robot to go to the post. - A bet on interest rates being lower in two years.
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