Even though I managed to sneak through physics with an “A”, I don’t think I learned all that much other than how to plug n’ chug a book full of equations. But one of the few conceptual things I’ve retained is the usefulness of potential energy, particularly elastic or chemical energy in it’s natural resting state.

As defined by Wikipedia:

Elastic potential energy is the potential energy of an elastic object (for example a bow or a catapult) that is deformed under tension or compression.

Right or wrong, I consider a saved money analogous to a drawn slingshot ready to unleash it’s payload.

Saved money, and other forms of relatively liquid wealth (e.g. equity investments, precious metal reserves, owned real estate), can be used much like a kid with a loaded slingshot — for whatever he chooses to shoot at.

Not only does saved money — economic potential energy — give its owner the ability to acquire goods, it also has strategic advantages:

1. collateral for future leverage.
2. leveraging the threat of unleashing it – or not unleashing it.
3. using it as bait tempting an adversary to try to acquire it.

The uses can be as many as the owner is creative!

Why the flashback to physics and investing 101?

China: $15 Trillion in Home Equity & No Mortgage Debt

I ran across these mind blowing stats comparing United States real estate vs. Chinese real estate. Specifically, home equity and debt levels:

Current United States Total Home Values – $15 trillion

The mortgage debt on those homes? 80%, give or take a few percentage points

Current China “Lower & Middle Class Only” Home Values – $15 trillion

Mortgage debt on those homes? Zero

- Mario Cavalo

That’s a lot of potential energy dollars.

But somehow, comparing $15 Trillion in monetary reserves to a slingshot doesn’t satisfy my sense of proportions.

Considering that the 2009 U.S. GDP was $14 Trillion and change, $15 Trillion in non-mortgaged wealth reserves waiting to be tapped is more like an monetary asteroid crashing into an economy raining down trickle down economics (e.g. jobs and investor confidence) rather than the usual death and destruction.

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Image by Claire Sutton