Can we talk about the GIANT pink elephant that’s lurking in this country right now?
It’s the U.S. national debt…which is currently at $33.1 Trillion. 🤯
Ummm that’s a whole lot of cash. So you might be wondering whyyy in the heck it’s not being paid down by the government.
Well, we’ve got your answers today, and they may surprise you a bit…
Here’s to learning the truth and turning fears into cheers. 🥂
IN JUST 5 MINUTES OR LESS TODAY, YOU’LL LEARN ⏬ :
- Why the U.S.’s debt is significantly different from our ordinary household debt.
- How debt drives the economy.
- And how you can benefit from it financially.
Why The U.S. Debt Is NOT Bad For Biz
On September 25, 2023, the US National Debt hit $33.1 Trillion for the first time ever. 😳😳
This is up from $26.89 Trillion on the same day in 2020, to add more context, our current national debt compared to September 25th of 2000, our national debt was up almost 6-fold in just 20 years.
Perhaps even more stunning is the fact that “the debt is on track to top $50 trillion by the end of the decade.”
With the looming debt ceiling “crisis” happening in Congress, even if newly passed spending cuts are taken into account, the fact is the debt will continue to mount as the costs of the nation’s social safety net programs keep growing this is in conjunction to the rise of interest on the debt itself continue to barrel ahead unabated.
Turning on the TV 📺 or browsing your mobile phone 📱, you will surely find all sorts of conversations about the dire consequences of the U.S. not paying down its national debt.
The surging national debt has even been called by some as a national security crisis.
Moreover, the fact that many pundits have said that eventually, the bill will become due, many have suggested that we are robbing future generations’ economic stability for today’s gains– sort of like robbing Peter to pay Paul.
But, is that true? 😬😬
But in order to do this, let’s talk about Disney’s Maleficent.
The movie “Maleficent” provides a backstory to the villain in the movie Sleeping Beauty, showing her as a kind fairy who was misunderstood.
The same can be said about the U.S. debt. According to Stephanie Kelton professor of economics and public policy at Stony Brook University and the New York Times bestselling author of the book, “The Deficit Myth,” there’s a lot of misunderstanding about the US debt.
Misunderstandings Can Lead to Fear
👉 You see, people feared Maleficent because people did not understand her and only saw her as a threat.
Debt Drives the Economy
The same is true for the U.S. Debt Crisis: Many fear the national debt due to misunderstandings about its nature.
For starters, according to Kelton, there’s a big difference between our loans/ our debt and those of the 🇺🇸 US government.
If you’re unable to repay your debts, creditors have the right to seize your assets, potentially leading to enduring financial hardships.
However, the U.S. government operates differently.
The U.S. government, the issuer of the dollar, has the unique capacity to repay its obligations.
Unlike individuals, the government can settle its debts using the currency it creates, ensuring it doesn’t face the same financial dilemmas as ordinary citizens.
Put simply, the U.S. government isn’t constrained by the need to earn dollars to settle its debts, as it has the authority to produce its own currency.
Crucially, the U.S. government has the ability to generate funds as needed for any of its expenditures, debts included.
This ensures that the U.S. government will never face insolvency and doesn’t rely on external borrowing.
Another way to look at it is as if it is a community potluck: If the government brings 10 sandwiches to a community picnic but takes back only 9 for its own officials, there’s 1 extra sandwich 🥪 left for the people.
Even though the missing sandwich is considered a “shortage” or deficit on the government side of the “balance”, it’s like an unexpected treat for the attendees or “surplus”.
What happens next — whether people share the sandwich, save it for later, or give it to someone in need — affects the mood and energy of the picnic. In this case, the mood and energy represent our economy’s performance, which is measured by GDP.
All this may sound like we are suggesting that the U.S. should be able to continue to write checks without any consequences.
In the immortal words of the former coach turned sports commentator, Lee Corso! “Not so fast!”
While taxes have a broader function than just financing government activities. Instead, they play a role in shaping the behaviors and actions of citizens based on the policies the government wishes to promote.
For example, a tax incentive might be given to encourage the use of electric cars, or higher taxes might be placed on cigarettes to discourage smoking.
➡️ Besides shaping behavior, taxes also serve as a tool for controlling inflation — the rise in prices of goods and services.
By taking money out of circulation, taxes can help prevent the economy from “overheating.” 🔥
The idea of managing an economy can be likened to maintaining a balanced ecosystem.
Too much of one thing can disrupt the balance.
Similarly, when the U.S. accumulates a significant amount of debt, it might be tempted to simply print more dollars to address this debt.
However, if the number of dollars 💵 in circulation vastly outpaces the actual goods and services available for purchase, prices start to rise.
This scenario is termed inflation.
The primary concern here isn’t merely the debt the government has but the rising costs of everything from bread to houses.
Real tangible assets, like land, gold, or properties, become crucial in such scenarios.
These assets retain their value or even appreciate, during times of inflation. When the value of paper money becomes uncertain due to excessive printing and rising inflation, people often turn to tangible assets as a safety net.
These assets are not easily affected by the whims of economic policies or the printing press, making them stable investments in uncertain times.
🏢 Multifamily apartments, like other real estate investments, provide tangible value.
But what sets them apart is their consistent income stream.
While a homeowner with a fixed mortgage enjoys a stable monthly payment, they don’t have an income component that adjusts with the market.
In contrast, owners of multifamily apartments can benefit both from the stable expense of a fixed mortgage and the dynamic income potential of rents.
As market conditions change, especially in inflationary periods, rents often rise.
When leases for tenants expire, landlords have the flexibility to adjust rental rates to match the current market. This adaptability can be especially beneficial in rapidly changing economic environments.
If costs for utilities, maintenance, or other expenses rise, those increased costs can potentially be offset by adjusting rents.
Take, for instance, a multifamily apartment complex we own in Rogers, Arkansas.
As of now, even with the backdrop of skyrocketing U.S. debt, surging inflation, and steep interest rates, our property’s financial health keeps getting better. 😘😘
Currently, we’re witnessing a 12% increase in lease renewal rate year-to-date. 🙌
This is just a real-life example of how investors like us can take advantage of the current circumstance and profit regardless of how fearful or shell-shocked others may be.
That’s awesome news for all of us in that deal!