A seesaw is the perfect analogy to understand many aspects of the economy and investment markets.
For a seesaw to work properly, you need at least two people‒one on each side. When looking at the economy, we should always be asking, “Who is on the other side of the seesaw?”
In this episode, we apply the seesaw analogy to federal budget deficits, the national debt, and trade.
- What seesaws have to do with investing and the economy.
- The importance of having an informational edge.
- Why the private sector (i.e. households and businesses) can’t save unless the federal government runs a budget deficit.
- How someone’s spending is always someone else’s income.
- Why federal budget surpluses always lead to recessions.
- Why the national debt will never be paid off.
- Why the private sector loves to invest in federal government debt.
- Why it is impossible mechanically for the federal government to go bankrupt.
- Why China holds a large portion of the U.S. national debt.