FAMILY UPDATE!
Our kids, Chris and Jesse, recently had a piano recital and it was truly an unforgettable experience. Chris' performance of "Redemption" was nothing short of amazing. He played the piece from memory and even brought his grandma, Yaya, to tears. We're all so proud of him and excited to see where his piano skills take him next.
In addition to music, we've also found a new family sport to enjoy together - pickleball! It's been so much fun learning the game and getting some exercise in. And with a new indoor facility that has air conditioning, we can play all summer long without getting too hot.
Orchid picture below. Besides this one that I bought, I have never seen another one like it at any orchid show.
This week, let’s look at three timely financial issues you may be discussing around the water cooler. Do people still do that?
1. You've probably been hearing buzz about the debt ceiling. Well, let me tell you why it's not really worth losing sleep over.
First off, let's clarify what the debt ceiling is. It's basically a cap set by the U.S. Congress on how much debt the federal government can accumulate. When the government needs to spend more than it collects in taxes, it borrows money by issuing Treasury bonds. The debt ceiling is there to make sure things don't go too crazy with all that borrowing.
Now, every so often, Congress has to raise the debt ceiling so the government can keep functioning. This can become a political tug-of-war, with both sides trying to score points or push their agendas. But guess what? Ultimately, they always find a way to raise the debt ceiling. It's happened dozens of times in the past, and it's bound to happen again.
Why? Because not raising the debt ceiling would lead to some pretty disastrous consequences. If the U.S. government can't borrow more money, it can't pay its bills, which could lead to a government shutdown, a default on its debt, or even a global financial crisis. Trust me, nobody in Congress wants to be responsible for that mess.
So, while it might seem like a big deal when you hear about the debt ceiling in the news, remember that it's mostly political theater. The chances of Congress letting things get truly out of hand are pretty slim.
2. Next up let's chat about inflation and stock market returns. You might think higher inflation would automatically lead to lower stock market returns, right? I mean, if everything's getting more expensive, it must be harder for companies to make money. Well, not so fast!
While inflation might impact individual companies and their costs, the stock market as a whole doesn't necessarily move in lockstep with inflation. In fact, stocks can sometimes act as a hedge against inflation because companies can raise their prices in response to higher costs. This means that stock returns might keep up with, or even outpace, inflation.
3. You may have been hearing a lot about the U.S. being the "reserve currency" of the world. This new chatter stems from an agreement between Russia and China to use their own currency to trade oil.
While this may sound frightening almost every economist had the same reaction: Peter Earle with the American Institute for Economic Research remarked, "Even beyond the decades that such a change would probably take, the likelihood of the yuan becoming the global reserve currency ranges between profoundly unlikely to essentially impossible."
So what does "reserve currency" mean?
Think of the global economy as a big marketplace where countries trade goods and services with each other. To make this trading easier, they need a common form of money, called a reserve currency. The U.S. dollar is widely accepted and trusted, so it's become the world's main reserve currency. This means that many international transactions are done using dollars, even if neither party is from the U.S. It helps simplify trade and make it more efficient for everyone involved.
There are huge advantages the U.S. gets from having the dollar as the world's main reserve currency:
Cheaper loans: The U.S. can borrow money at lower costs because people trust the dollar.
Better buying power: The U.S. can buy stuff from other countries more easily and often cheaper.
Steady money value: The dollar stays stable, so people want to invest in the U.S.
More control: The U.S. has a big say in global money matters, which helps American businesses.
Making money from money: The U.S. can create money to pay for things and make a profit from it.
This is a big one. No other country can print money that the whole world has to accept as having the same value as the other dollars floating around. If Argentina prints money, it just means it costs more of their dollars to buy our dollars. It inflates their currency.
These perks help keep the U.S. as a leading player in the world economy.
I bet you know more now than you did five minutes ago!
Be Blessed,
Dave
P.S.- I am having Social Security Strategy seminars each Saturday and 10:00AM. To register go to www.SocialSecurityRSVP.com.