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...]
126: Where Federal Money Flows
Why cutting federal spending and trying to lower the national debt reduces household income and spending, potentially causing a recession. Photo by Julie Macey In this episode you'll learn: What does the U.S. federal government spend money on.How big is the U.S. national debt and who owns it.How most people receive more Social Security benefits than they paid into the system.What happens when interest costs becomes a larger portion of the federal budget.What are the … [Read more...]
MNY107 Plus: Timing Smart Beta, Lending Club Woes and the National Debt Size
This week on Money For the Rest of Us Plus we review a new academic paper on whether it is possible to time exposure to smart beta factors. I also discuss the departure of Lending Club's CEO and whether that should change our opinions on peer-to-peer lending. Finally, we look at different measures of U.S. national debt size and look at Brazilian economy to see why it is experiencing inflation and high interest rates even though it controls its own currency and is in a recession. The … [Read more...]
MNY106 Plus: National Debt, Solar Bonds, Permanent Portfolios, Emerging Markets and Dissecting A Portfolio
This week on Money For the Rest of Us Plus we cover a number of different topics. I address hyperinflation and the national debt. I also answer questions on emerging market stocks, solar bonds and international stock exposure when implementing a Permanent Portfolio. I also analyze a member's asset allocation in his retirement account to estimate the expected return and risk and compare it to one of the Hub's model portfolios. The episode length is 24 minutes. … [Read more...]
106: How Worried Should You Be About the National Debt?
Why some nations are at risk of default on their national debt and others are not. Plus why the U.S. national debt will never be repaid. Photo by J.D. Stein In this episode you'll learn: Why the federal government is not like a household or business.Why the federal government should focus on economic growth and inflation and not fiscal soundness.Under what circumstances have nations defaulted on their national debt.How federal governments can print money by coordinating with their … [Read more...]
78: What If the Economy Permanently Stopped Growing
How a zero-growth economy would impact investing, employment and lifestyle. It depends on whether the economy is flat lining due to population shrinkage or a willful choice to be less productive. Photo by J.D. Stein In this episode you'll learn: How economic growth is measured.Why long-term economic growth is tied to population growth and/or productivity growth.How population decline can lead to deflation, stagnating stock markets and falling bond yields.What happens if … [Read more...]
74: Capital Flows Where It Is Treated Best
How investment capital seeks out the most attractive opportunities, and why that is causing China to dump some of its U.S. Treasury bonds. Photo by J.D. Stein In this episode you'll learn: What it means to have your investment capital treated well.Why the U.S. dollar is stronger than the Canadian dollar.What drives currency exchange rates.What are the negative consequences of a weak currency.What are foreign currency reserves and how do countries acquire them.Why China owns U.S. … [Read more...]
42: All Countries Are Insolvent and That’s A Good Thing
Why all federal governments are insolvent but investors still line up to buy government debt at low interest rates. Photo by Mark Strozier In this episode, you'll learn: What does it mean to be insolvent.What is the financial net worth of the U.S. government.Why federal governments are forced to run budget deficits.How GDP is calculated.Why haven't interest rates skyrocketed if federal governments are insolvent.What happens if China dumps all their U.S. debt. Show Notes The … [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...]