Borrowing for Investment: Turbocharging the Economy and the Role of the US Dollar

📚 Richard Duncan has extensive experience in economics, having worked with the international monetary fund and the World Bank.

🌍 He produces a video newsletter called macro watch, which explains how the economy works in the new age of fiat money and analyzes the forces driving financial markets.

💰 Duncan advocates for the government to borrow on a large scale and invest in new industries and technologies to stimulate economic growth.

💰 Government debt in the US increased by almost $3 trillion in three months due to the impact of the pandemic.

📈 The influx of money and disruption in the global supply chain caused high inflation rates and increased government debt.

🌍 The author suggests investing trillions of dollars over a decade in new industries and technologies to boost the economy.

Japan's debt ratio is more than double that of the US.

The BRICS countries have not made significant progress in their economic cooperation.

The US dollar's dominance as the global reserve currency is due to the country's trade deficit.

The Silicon Valley Bank faced a crisis due to buying government bonds and experiencing losses when the Fed tightened monetary policy.

The Fed quickly created a lending facility to prevent a systemic banking collapse and allowed banks to borrow money using government bonds as collateral.

The Fed's actions reversed its quantitative tightening efforts and prevented a recession, but raised concerns about inflation and the housing industry.

📊 The job market has been strong, with low unemployment rates and job creation.

🔥 Despite expectations, there hasn't been a recession yet, thanks to various factors like AI and government stimulus.

💰 The economy remains robust, leading to strong asset prices in equities, real estate, and debt.

💡 Equities have had a tremendous run, driven primarily by the Magnificent Seven (Nvidia, Microsoft, Facebook, Amazon, Apple, Alphabet, Google), with their combined market capitalization now exceeding Japan's GDP. These companies are expected to bring about a transformative industrial revolution with their advancements in artificial intelligence.

📉 In the short term, there may be a slowdown in equities due to AI fatigue and quantitative tightening, where the Fed is reducing the money supply. This could put downward pressure on stock prices and potentially lead to a market panic.

🏠 The housing market may cool down in the future as well, although long-term investment in rental properties is still considered wise.

💰 Investing in bonds with high yield and low risk during a potential recession.

🏭 Government investments in infrastructure, science, and energy projects to support the economy.

🌎 Concerns about China's advancements in AI and the importance of the United States taking the lead.