What are the tangible and intangible factors that have contributed to long-term U.S. stock market outperformance compared to the rest of the world? Despite these advantages, why might we still want to continue to be globally diversified? Show Notes American productivity still leads the world—The Economist The Outlook for Long-Term Economic Growth by Charles I. Jones—Federal Reserve Bank of Kansas City How Much Will Global Warming Cool Global Growth? by Ishan B. Nath, Valerie … [Read more...]
433: What Happens If The U.S. Defaults On Its Debt? Here’s Why It Won’t
What are the grave consequences if the U.S. debt ceiling isn't increased and the government defaults? What would the Federal Reserve and the Executive Branch do to prevent default if Congress doesn't act? Topics covered include: What are the potential impacts of a U.S. default on the stock and bond markets, and the overall economy What causes the U.S. to have a perennial debt ceiling crisis Why it is uncertain when the U.S. government would run out of money to meet its … [Read more...]
295: Federal Reserve Insolvency and Monetizing the National Debt
How central banks can become insolvent and why it can lead to hyperinflation. What are four ways the Federal Reserve and the U.S. Treasury could monetize the national debt. Topics covered include: What are the major asset and liabilities of the Federal Reserve How does the Federal Reserve make a profit and what happens if it suffers a loss. How has the Federal Reserve has significantly expanded the types of assets it will hold and what are the risks. What could cause the … [Read more...]
245 Plus: March 2019 Mid Month Update, Inverted Yield Curve, Puts on ETFs, and a Private Lending Limited Partnership
In Plus episode 245 for the week of March 23, 2019, we look at investment conditions as of mid-March including flash PMI reports. We revisit the accuracy of inverted yield curves in predicting recessions, and what is different this time now that the yield curve has inverted. We look at why long term interest rates could increase during the next recession. David discusses his recent trade to buy puts on two non-investment grade fixed income ETFs. Finally, we look at a limited partnership … [Read more...]
241: Do Budget Deficits Matter? Modern Monetary Theory Explained
Why modern monetary theory isn't worried about federal budget deficits, why budget deficits never go away and what are the risks if budget deficits get too large. We also explore what else proponents of modern monetary theory believe. Photo by Kenneth Santos In this episode you’ll learn: What are the core principles of modern monetary theory.How federal budget deficits increase private sector savings.What is crowding out as it relates to interest rates.What are the risks of running … [Read more...]
169: The Debt Ceiling—What Happens If the U.S. Defaults
What could happen if the U.S. Congress doesn't raise the debt ceiling and defaults on U.S. financial obligations. Photo by Augusto Navarro In this episode you’ll learn: What is the federal debt ceiling and why does Congress always wait until the last minute to raise it. How long has the debt ceiling been in place. What would be the consequences of default by the U.S. government on its obligations. Why does the government continue to run a budget deficit instead of a … [Read more...]
157: The Most Important Economic Question of Our Time
Why the likelihood of a future fiscal crisis sparked by the national debt depends on whether there is a limited or an unlimited supply of money. Is it possible the federal government's endless borrowing could crowd out the private sector and harm the economy? Photo by Cesar Marchan In this episode you’ll learn: How much is the U.S. national debt expected to increase. What is the financial concept of crowding out. How money is a zero-interest perpetual liability. How the … [Read more...]
MNY042 Plus: Federal Governments Outsource Money Creation to Banks
In this week's Money For the Rest of Us Plus episode, I explain that while governments can theoretically create money by spending that in practice they have outsourced money creation to banks. I also share a paper that helps explain much of what was covered in Episode 42. Finally, I discuss the rebound in oil prices, the strong jobs report and my bond portfolio. The episode length is 12 minutes. … [Read more...]
4: Seesaws, Budget Deficits and the National Debt
A seesaw is the perfect analogy to understand many aspects of the economy and investment markets. Photo by simplesomia 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. You'll learn: What seesaws have to do with investing and the … [Read more...]
