Lyn Alden Schwartzer is an engineer who writes about investing at Lyn Alden Investment Strategy. Her article, “Why This is Unlike the Great Depression,” is available at her website and at Seeking Alpha.
Lyn explains big ideas with simple words and charts. She said the U.S. was the world’s largest creditor nation after World War I, “meaning that we owned more foreign assets than foreigners owned of our assets.” This helped us during the Great Depression, but by 1985, the U.S. was a debtor nation.
I learned from Lyn that now Japan is the world’s largest creditor nation. Over time, Japan “built up a giant stockpile” of assets and has been able “to live off of that investment for decades.”
The U.S. entered 2020 as the world’s largest debtor nation. The Federal Reserve “went into this crisis with a balance sheet of approximately $4.5 trillion, never having normalized it after the 2008 crisis.” The Fed is printing money and adding $2 trillion of debt per month. The long-term solution will be economic growth and (most likely) inflation, so the government can pay debt with dollars worth less than the dollars that were borrowed.
The Fed isn’t the first to print money during hard times. Colorful, 1914-1923 German Notgeld (“emergency money” or “necessity money”) was printed by various local governments and businesses. The 1921 75 pfennig banknote below from Papenburg, Germany depicts a tax collector demanding payment.