Elon is wrong

We’re having opposite day today…

Usually we report on something that is UNDER reported on, and today, we think we need to dispel some truth about something which is overreported on!

It started with this X from Elon…

I followed up with my reply…

See, it’s easy to take a surface view on this.

Big number + debt = bad.

But we must think deeper about these topics.

I appreciate Elon understands this, but has to play to an audience too, especially since he wants to try to reduce government waste.

So in my view, he is juxtaposing the high government debt versus the recent news that only about 1% of government workers in the US do 40 hours per week of work…

Since the US has reserve currency status and most transactions are conducted in USD, countries want to park their USD in US treasuries, since they’re highly liquid and very safe.

This leads to natural demand for US treasuries…

And the component here is that if you want US treasury payments to be less, what you’re actually asking for within this context, is for countries to buy fewer US goods!

As I said in the X above, the National Debt increases, specifically with the US, because the US is a trade beast — it is not really because of silly spending.

This relationship is different to other nations, like the UK, where there is heavy scrutiny over running a 4.4% deficit to GDP (in context, the US’ is about 6.6% and they ceremoniously lift the debt ceiling every year or so because they know there is no actual issue).

The US simply cannot be margin called, because if they are margin called, that means an end to lots of society as we know it…

And the irony is that everyone still is in HUGE demand for US treasuries.

So it’s either the US government says ‘please stop buying from us,’ or things continue as they are with the US being a monopoly within foreign nations reserves!

All of this is without mentioning the Fed has become a huge owner of US treasuries, contributing to the increase in the national debt…

Which means the US owes money to… itself?

Yeah, that doesn’t sound too insane.

Have a watch of my stream with Trader X.O earlier this week!

And you can still join Fink Ultimate for 40% off!