Pretty sure its a bit of a joke on the idea that you can sum up a complicated subject. You can take it but you shouldn't. Does the the covid vaccine stop covid? No. Instead it reduces the hospitalizaton rate by 99% and prevents severe cases which is very similar to stopping covid.
@@MaestroAlvis What you just said about the vaccine is what some videos say in 10-20 minutes, which is exactly my point. Empty words to pad the video to a certain length.
To the contrary, I'd rather they make me the chairman, so I can divert more real wealth into my own pockets. You are giving too much credit to the FED, as though it is actually an establishment by the people for the people. The only reason why the USD lasted this long was because USA won both the world wars and USSR collapsed on itself (USA didn't really win the cold war, Ronald Reagan led Gorbachev for a ride). But now that the real powers in the world are shifting, there is no way the USD can last.
I'll add that, to my understanding, the Fed recently has expressed an interest in having HIGHER inflation coupled with very low interest rates, because this makes it easier to service the national debt. That being said, the economy is now so dysfunctional that it likely can't sustain high inflation. As we've seen, inflation has rarely risen above 3% since the GFC in 2009 because most of the money is concentrated in a few hands. The current 5% we're seeing is likely just a statistical artifact caused by the pandemic: production forced offline and people delaying purchases for more than a year. On the other hand, if you don't already own a home, inflation is out of control. Housing, healthcare, and higher education costs are rising 2-3 times faster than the CPI. In fact, last year the average gross income was LESS than the amount that housing prices increased on average. Meaning, if you had saved every dollar you earned as an average American, you would be no closer to owning a home at the end of the year. It's a miraculous economic failure. Our leaders are gods of failure.
The extent to which the government and the fed protect the home as investment meme is disgusting. At least, I can say that as someone who would have liked to purchase a home in the next few years. If homes were seen as something more like a car, or at least value neutral, we might not have such a problem. But that would be a huge shift for literally everyone in the country and voters would hate it.
@@maxcarren112 land appreciates in value yes. But the attitude to the building on it has shifted from net neutral to net gains being desired. It makes the working class more mobile because your not loosing money each time you move but if you don't own a house it makes it near impossible to get in with the stagnant wages once inflation is accounted for.
@@maxcarren112 There's tons of land that could be developed in the US. They just won't let you build on most of it. And in places where you can build, the building restrictions are so onerous that low income people don't stand a chance. In the olden days you'd just throw up a log cabin in your first year, and gradually work your way up to building a proper house. Now they expect everyone to be ready to build a proper house right out of the womb and comply with 1000s of pages of code and have tens of thousands of dollars set aside for useless permit and inspection fees.
@@PasDeMD We really need to move away from homes being considered an investment. It's bad for everyone except flippers and developers. It's especially bad for the economy as it just ties up what could otherwise be productive money in a physical asset that is only appreciating due to supply/demand imbalances (real or otherwise). I'm a home owner and if prices dropped 30% over the next year the main impact this would have is that it would be cheaper for me to buy a nicer home as the price difference between my current property and a more expensive one would be less in absolute terms.
@Vercusgames that money isn't getting printed immediately. Its going to be over 10 years. And I know that the money supply has been 45% printed since the pandemic. GDP was 21T in 2019. We managed to print 5.5T in a year from stimulus packages.
@@HH-le1vi No sadly it will likely be a lot worse than that. Not that it already isn't. The problem is we are to blind to see past our own noses. Perhaps the question to ask is what could 10$ get you 10 Years ago, that has since doubbled since then? I guess havig lived in D-Mark post Teuro (German pun Expensive + Euro), it was easier to feel the strength of the Mark even if it was 1/2 the value of an Euro Coin. You still managed to pruchase twice as much with it, and the Euros been sinking ever since.
painful for who? bad for who? that is my question when all these statements are made. It's not bad for me. We've been tricked in to believing these things by an org run by banks.
Milton would say the economy is sick. It needs to take medicine. But ppl don't like to take medicine because it doesn't taste good and you still have to go through a rough period before you get better. The economy has a solution, but nobody wants to take the medicine because they are afraid of the cost to get better at the moment.
I'm an aspiring banking lawyer and i was talking about the Argentinian economy with a friend who is studying political science and we realized that even if this past 2 years we have seen high inflation (as per usual) the worst is yet to come, during the pandemic the demand for pesos has risen as people whos salaries where slashed or lost their jobs started selling their savings in dollars to afford the costs of living, thus the continuous money printing from the government has not yet shown its full inflationary power, as soon as the job situation stabilizes again and people start trying to buy dollars again, we will either be left with a ridiculous surplus of pesos with no demand or the need of quantitative tightening
Last month Argentine gov printed enough bills to increase the monetary base around 7%. 180.000 millon pesos out the fin air just to pay statal salaries. I worked at a Bank in Argentina (mostly in cash solution projects), and despite what most people believe, the demand of pesos keeps growing as more people turn into the informal economy. Even with the apparition of digital wallets more and more individuals prefer to work with cash. Its silly, but the market wants cash (lots of it!). You would be amazed to hear how Argentine banks "trade" bills between each order to avoid cash transportation fees. High cash income (money comes in) banks "PAY" to other banks if they come to collect excess cash, and high cash output (money goes out) banks want to buy cheap cash in order to avoid asking for new bills to the central bank.
Huh, the rent in my area doubled in the last four months alone, food tripled, medical care doubled, the only thing that got cheaper was my phone bill for some reason. Gee, I wonder why I think we're in a full tilt case of inflation.
@@bobnothing4921 Not really. My last landlord wasn't exactly hiding why he was raising the rent: he could charge northerners twice what he'd get out of the locals, so he was raising the rent high enough to force them out. (He's thinks he's very clever for someone whose office walls aren't all that thick.) This isn't a new phenomena in my part of the country, only the severity of it is different.
Maybe when you learn inflation is not your individual experience of one local area of price changes, aka take any high school level economics class, you'll realize why you sound dumb
First video I’ve seen of yours, does a great job of laying out information in depth but in a clear way so that it feels only like surface information. Really effective and useful!
Sadly you'll probably learn more here than at your University. First question you should ask of all your professors on the first day, find out if they've ever actually held a job in the field that they teach.
@@CSpottsGaming What exactly is so offensive to you that I suggested asking a very rational question? Does this mean that you're a professor who's never held a private sector job in your field?
@@bobnothing4921 Nope, I'm a Master's of Finance student who worked in the oil and gas industry prior to this. I've gotten my hands dirty. There are plenty of valid criticisms you can direct toward the education system it's just that in my experience the people who vocally rail against it when *no one asked* are also desperate to justify their decision not to get educated. And to be clear, it doesn't need justification. But it does scream "insecurity".
I run a small manufacturing business. My plastics and metals material prices have all increased this year, between 25 and 70%. Makes me scratch my head when I hear inflation "might" be 2-3%.
The inflation number quoted is the Consumer Price Index. As a manufacturer you are not a consumer, and therefore the price you pay for raw materials has no bearing.
Another great video. The problem is and has always been, that the lawmakers and government big wigs dont understand basic economics, unless of course it's the economy of their own bank accounts.
I totally DISagree. They KNOW what's going on and are trying everything they can to hike up inflation and keep it there as long as we're all unable to afford basics,. They have us by the necks and we have no power to change our situation .
@@shayanroychoudhury9066 this. the number of people who actually need to work on those scales and systems is pretty small, it is a highly specialized skillset. If one looks at experts with decades of experience in an esoteric field and says 'they are not doing what I, with my zero years experience would do!', it probably is not the expert that doesn't know their job.
refreshingly honest and educational (for me anyway) content. it's criminal how little of this crucial area of our lives is covered in high schools and how deviously one sided any/all coverage of it is (corporate friendly version ONLY) by our nation's corporate media outlets. a community having exposure to a range of genuinely varied viewpoints on a given subject renders propaganda on that subject useless, or at least easily recognised by the community and filtered accordingly.
Can you explain what about a housing price drop would be devastating exactly? It's not like people are thrown out of their home, they still get to live in it , plus they now pay lower property taxes. To a homeowner, the value of the house they live in is different from its market value
A lot of people don't just have a mortgage - they're in so deep that any drop in home values will put them underwater. Which means they can't move unless they can put up cash to cover the difference. Also, many are dependent on lines of credit, which require their home value to continually rise (thus, opening up room for more credit).
@@iloveprivacy8167 sounds like a system that's bound to collapse in on itself sooner or later anyway. In Europe most people buy one home and live there until they die, so what would be the argument against raising interest to control inflation here?
Its bad because all the suckers who bought in the last year or two will be holding loans which the collateral(House) doesn't cover as the price of the property went down.
Inflation and the national debt could be eliminated in less than a year very easily. The problem is that the person who tries to do just that would go the way of Lincoln and Kennedy. The last two people who tried to eliminate the bankers' bottomless well of free money.
The us government doesn’t have 28.5 trillion dollars hanging around. I believe tax revenue was 4.5 trillion last fiscal year. So if we shut down all operations of the federal government to pay off the debt, there’s still roughly 24 trillion dollars of debt outstanding
@@mikedonnelly5775 You don't know enough about how our money system works, so I'll explain the steps that will do just what I said. *_1. REVOKE THE FEDERAL RESERVE ACT AND NATIONALIZE ALL THE FED'S ASSETS_* --- This allows the government to stop digging the debt hole and to get the FED (the source of the problem) out of the way. Our money is debt. Keep that in mind. *_2. PASS A BALANCED BUDGET AMENDMENT_* --- This will prevent congress from just spending willy nilly on everything they could possibly want. Just because you CAN print all the money you could ever want does not mean that it is fiscally responsible. *_3. REPLACE EVERY FEDERAL RESERVE NOTE WITH NON INTEREST BEARING UNITED STATES NOTES_* --- Lincoln used debt free Greenbacks. Kennedy used United States Notes. Both were killed because the banking cabal wasn;t getting their cut. When all the Federal Reserve Notes and treasuries are swapped out, the debt is paid and GONE. The congress has Constitutional powers to create all the money it needs to promote healthy commerce. Replacing crap money with good money falls within that mandate and is 100% legal and ethical as well. Yes, all three of these can be done in less than a year. When there are no more Federal Reserve Notes in circulation and their value has been zeroed out (after the exchange window of time) then there is no more national debt.
@@tylerdurden639 1. you need to revisit the FED's balance sheet. It's currently 8.5 trillion, 8.5 trillion is not 28.5 trillion. 2. I agree don't know where you insinuated that I was against this. 3. That's not true. Congrees can't create money. Constitution aricle 1 section 10 “no state…shall make any Thing but gold and silver Coin a Tender in Payment of Debts.” so they need currency to be back by gold and silver and can't print money. I want the FED gone too. I read the creature from jekyll island.
They could also begin selectively forgiving the debt they have on their books, This would keep the money they have produced in circulation while relieving that financial burden from small and medium businesses or home owners that they hold the debt for. This in turn will free up the money those businesses and consumers have and make the financial impacts of correcting inflation less painful.
With general prices increasing, it had became harder and harder for any small business owners to operate. The increase in the assets of stock market and real estates have made it nearly impossible for poor people to do anything at this point
One problem with this is we are now a globalised economy. Meaning we purchase allot of goods from other countries in which their services can be very cheap thus making our products cheap. So we might see some deflation in some products.
Great and clear explanations, all well laid out and connecting dots that usually are left loose in other videos. Congrats! Very well done material you have here, my friend influencer.
Well, the system does need a lot of improvement, but why we have said system is because other systems collapsed and this one stayed. There is no perfect system until there are perfect people, and since we will never have the latter, well...
@@SkySong6161 I've been fairly convinced that the powers that be were secretly hoping for the end of the world in 2000 and then 2012 so they could continue burning the candle at both ends without any concern for the future.
Inflation is like needing sleep. Doesn't matter how many rebulls you drink or amphetamines you down, sooner or later....you....must....sleep. They are going to have to just let it crash and if they don't well it will grind to a hault which is far worse.
For housing prices. A drop in prices only screws over those that bought in the last year or two. Houses aren't speculative investments, they are a store of value and a necessity for citizens (whether buying or renting, cheaper list price means cheaper rent). Point is like 95% of the population benefits, and a little more if it's not as profitable to construct houses.
In normal be times, yeah, more money for consumer spending. And realistically, buyers are screwed for a few years anyway because of closely costs. There are also equity and mortgage REIT they said get hit, and cause some ripply affect. But, currently, we are at record low inventory, for basically all consumer goods. We are starting to see housing inventory grow, but supply is still at historic lows. Supply chains are so screwed up right now, that if that money doesn't go towards housing it will probably just find it's way into another assest.
I didn't realise you had "only" 100k subscribers until this video, I had already watched to other videos of yours and believed you were one of those big channels with over 1mi subscribers. Very good quality content! (and don't worry, you'll become one of the big ones very soon :) )
You are forgetting one factor: Other countries have their reserves in US dollars. People all over the world have their savings in US dollars. This means that the USA will be charging trillions of dollars in "inflation tax" to other countries, to spend that money discretionally within the USA. What happens is the rest of the world says "fuck it, I'm switching to euros" ?
I don't understand why collapsing property prices would "hurt" homeowners. If you own that house to live in, it doesn't matter how the market goes as long as you could afford it when you bought it. It only affects speculators.
Not everyone lives in the same home their entire lives. Also sometimes you might just need to liquidate your house in case of an emergency because life happens.
@@MinecraftMasterNo1 and that's a risk you're supposed to consider before purchasing. Nobody who can't take that hit should have bought in the last two years, and especially not now.
Very accurate video, except for the last part in which you predict inflation will probably not rise above or far above 2% in the US (which we now know it did). Not a shame though because almost nobody saw this coming after such a long period of low inflation. You could have also mentioned just to stop quantitative easing without quantitative tightening as the practice itself is of questionable moral. Quantitative tightening is quite an unrealistic in the economy of western countries these days. What we see now instead is that the FED has chosen to gradually increade interest rates. (But is still doing quatintitative easing?!!!)
I don't know what circles you're running in, but to everyone I know this inflation was so obvious. If you shut down half the economy while at the same time handing out trillions in stimmy cheques to everyone, there was only one possible outcome. Inflation is just too many dollars chasing too few goods. Hell, even the timeline was predictable. 1-2 year time lag.
@@zackp8201 Ikr? Maybe he's just trying to give the "at least you tried" cake to HMW. Everyone and their aunt saw high inflation coming! I'm particularly interested in the gold market, and damn! Even with such high interest rates, gold is already climbing back up! In previous years, this would have put a dent in the gold market for at least a couple of years. Maybe it's too early to say that the gold market is climbing up...maybe it's just my own bias, we'll see about that. But I think an 8% inflation rate is still cartoonishly low compared to what happened in the past 3 years. It's all going down. Edit: It's actually 9.1%...this can absolutely not be good! They'll either have to increase interest rates faster and halt the economy, or keep it slow, accepting record high inflation for a couple of years at least (which will still probably break the system as well, probably what they'll try to pull). I recommend watching Mike Maloney's hidden secrets of money, really helps you understand the system.
I am okay with any amount of collateral damage resulting from the total collapse of the real estate market. No price is too high to pay. 100% unsympathetic.
I own a house and still agree with you. It's too selfish to want my asset to double every 5 years for my own good... Because that means that all future generations will be completely screwed. Also, if it crashes, I can still end up on top. Let's say my house is worth 500K now, and my dream house is 800K. That's a 300K difference. Now let's say the market drops 50%. My house is worth 250K, but my dream house is only 400K, so only a 150K difference. That means I'll have a better chance to upgrade. So actually, anyone who owns 0-1 homes (85% of the population) will be better off if the market crashes. Only the people who over-borrowed to buy their house will lose, and they brought it on themselves by wanting to own at all costs while prices were soaring. Houses should act like cars and depreciate in value the older they get... But for some reason, it's the opposite. It's the only physical asset in the used market that appreciates.
@@shane250 Houses do depreciate; however the land that the house sits on is what appreciates. If you buy a mobile home and lease the underlying land that it's parked on, that home will go down in value. I wholeheartedly agree with you on the 500K to 800K house analogy. In an ideal world housing prices would stay flat. We don't want a crash because if there's a crash, then homebuilders won't have financial incentive to build more homes, exacerbating the shortage (which is why the housing market won't crash anytime in the foreseeable future).
@@michaelhunsinger8351 I get what you're saying about the building industry, and you're probably right. About the land vs house appreciating... That's irrelevant to the buyers themselves, it also doesn't calculate as such. If it was completely true, a new-build would have been almost 2X the price of a different (old) house in the same area. Right now, they are more expensive, but only by 10%-20%. If that's the depreciation on materials for 50 years of usage... It still doesn't make any sense. Another thing is, if the housing market collapse, the state would have to sell land for cheaper, and the builders would still make money, just not as much as they got used to make.
@@shane250 The state sells land? I believe most land is held privately and transferred (sold) privately. How does land appreciating not affect the owner? If you buy land for $50,000 and it's later worth $100,000, that affects you; it could obviously go down to $1,000 too if something happens to reduce demand in your area. The age of the structure doesn't matter necessarily, but the CONDITION/required maintenance will matter. I don't care that my concrete walls are 40 years old. If they are cracked and need repair, those costs/risks will go into the value of the home.
IMO the scariest economic outcome is that we go on kicking the can down the road and pretending like everything is hunky dory. The global economic system is completely dysfunctional and if fixing it means pain for the property owning class, then so be it. They chose to hitch their future to this ride, so they deserve to face the consequences. The alternative is to pass these problems off to less fortunate, younger people. The young and poor have already been suffering for many years, and every year it gets worse for them. Widespread devastation IS the solution. And this time there should be absolutely no bailouts. Those on the top need to feel severe pain to reset this broken system. It's time to take your medicine and stop pushing problems onto future generations.
Sacrifice one of the 4: Stock, Housing, Government or Dollar. And i think we all know what answer they will pick. Option 5: NONE OF THE ABOVE! RAISE TAXES! Jokes aside, nice to know.
Do you have an economics degree, I am currently studying it in highschool in Australia and I just wanted to say your video is the first fed related video that's either close or bang on the theory of interest rates and omo that is made by an individual content creator, your channel is fantastic and outside of one or two not so good videos. You are one of the first genuinely decent economics youtubers outside of economics explained, keep up the awesome work
economics explained is dogshit, his channel is banned on multiple econ subreddits, and some of his videos are filled with missinformation. If you wana study Econ, study econ, but don't fall for charlatan's who have an interest in spewing garbage for clicks
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Can you talk about the great resignation? Also good content!
According to neoclassic growth model, technology/innovation improvements lead to deflation and economic growth, which is what the US experienced during the dot com boom. That can definitely offset the money printing effects as there is more economic capacity.
@@ParadiseLordRyu I'm not sure I follow, why would people have demand for an action that not only doesn't directly help them, but devalues their already existing dollars?
How Many Works. You left us with a Key Question: IS there a limit to the amount of Debt the Reserve Bank can buy before it and our economy Go Boom, and how/why is that Limit??
Some smart people have speculated it's tied to our National Debt running over 30 trillion _(SOON™)_ ... but the more technical answer to that is actually baked into something called the "Compounding Interest ON our Debt" which obviously the Fed itself has kind of sort of an equivalent metric to as well since it deals so heavily in Treasuries & swaps.
You'd have to look at Japan's overleveraging rate they have to deal with (200%???) to get a better idea of just how far that Rubber band can be stretched. Either way, their Birth rates are already a notorious problem so regardless of what the bean-counters all say is "fine", there's actual Societal side effects that get baked into the national Psyche of people who know that their "Stimulus" has failed and they do not actually posses the Drill that shall Pierce the Heavens
It seems to me that this line of reasoning misses the point. Sacrificing the dollar means sacrificing _all_ of the other things. If the dollar drops in value, people won't be able to buy stocks, so stock prices will eventually collapse from a lack of demand. If the dollar drops in value, people won't be able to buy houses, so housing prices will collapse from a lack of demand. If the dollar drops in value, the government won't be able to make purchases and its payouts will be worthless, so all its services will lose their effectiveness. This isn't a trade off; it's just a delaying tactic that actually makes the ultimate unavoidable outcome bigger and more catastrophic.
When the Volcker fed attached inflation in the early 80's it was a different world. Corporations paid a much fairer amount in taxes. Workers actually still had rights. Debt was 30% if gdp not 130%. Moral hazard hadn't been practiced for decades. Our demographics were MUCH better. It's not looking good as currency debasement and inflation become structural.
That depends on how foreseeable it is that your job will either be automated or sent to India. Just ask people who used to work in call centers. Remember when USA companies had call centers in the USA? Those days are long gone.
In Canada, housing costs have more than doubled over the last year. Forget 30% increase....a house that sold for 300k in 2019, has now sold for almost 700k a month ago. Houses that would have sold for 200-300k 5 years ago are now being listed at 500k and selling above 700k. Be thankful 30% increase is all ya see. I bought a house with my mom in 2008 for 138k, life happened and my mom sold the house for 190k in 2012, that same house is now being listed for 436k...and I know the new owners personally and they have done ZERO upgrades. Have done ZERO maintenance. Be grateful your country is dealing with this issue
FED should just buy state bonds to fund infastructure with positive real value. Simple. Solved America. I'd like to pay $5.95 for express shipping on my Noble Price.
Funny how millonaires seemed to just have discovered inflation now, when shopping for 3rd and 4th homes and boats. They never asked regular folk about "2% inflation" because for us childcare, healthcare, rent, cars, higher education, all of it rises WAYYYY more than 2 percent annually and we don't see any of the income increases.. yet no one on CNBC cares to talk about it because they never even have to think about affordability of such blue collar, everyday expenses. Actual billonaires, who have added over a trillion dollars since the march 2020 lows, are complaining about FED policy and inflation the most!!! The freaking nerve of these people.
So basically, the head of federal reserve, could just say, we are expecting to see inflation go down. Then soon after(ie a couple of months), the reserve, will see it go down, not by a lot, however, if this process was repeated, with “data” that show inflation going down, then you might actually have situations where the inflation drops a lot. Also stop printing money, that might actually help as well.
@Don That’s what the process is called, when the federal bank, creates new dollars digitally, it relates back to the olden days where, they actually physically print cash in hand, I mean they still do to some degree for ATM machines, and other things, extra.
@Don spending less on the housing market would bring prices down, and would allow the people who couldn’t get on the housing ladder, by there own property. The reason prices are so high, because there is a high demand for people buying property. In the Uk, they have a housing shortage issue, which is making the prices shoot up. If you told people that inflation was going down, people would wait until prices would drop, and so there would be less demand on the market, and by the time inflation has gone down, more houses and properties will have been built. Allowing people to buy property at lower prices.
Depends how was it? It's New York. It will recover... It is recovering now, with le petit Napoleon Cuomo gone, it might recover a bit faster now. But, if people are still stupid enough to vote these 🤡🤡🤡 in, Como, DeBlasio, AO(Cowfarts)C, to name a few. Then what hope does Mr. Rossmann have?
Some of these problems do not exist in a cash economy. I live in Africa, we pay cash for everything, not mortgage, you can either afford something or you can't.
On top of wanting the Federal Reserve, as it stands now, abolished, I think that the crisis from 2008-09 should have been allowed to come to fruition without government intervention and bailouts. I think that ultimately letting those events run naturally would have been better overall than the situation we now find ourselves in. Unfortunately, we won't truly know if that's the case.
That’s the way the Free Market in Free Enterprise is supposed to work. Those who are not prepared to handle crashes, disasters, or changing consumer desires will not last. Sears, Montgomery Wards, CompUSA, and Fry’s ended due to inability to adapt to Free Market changes. Circuit Cty, MySpace, OshKosh, and Craftsman were bought out by their competitors.
Getting rid of the fed would mean no endless money for the military industrial complex. Fed was created in part so W. Wilson could buy his army with fiat dollars. No Fed no endless wars.
That's the entire fucking point. It's a entity technically owned by the banks of the United States, that regulates banks and helps them maintain a stable currency between them. Before the federal reserve every bank issued its own currency. We used to have thousands of currencies. Keeping it separate from government is extremely important because politicians will just feel pressure to blast the money printer and get us into inflation spirals, because Democracy doesn't work and everyone wants free shit paid for by everyone else.
@@flakgun153 But you know that banks in USA are private and owned by private people...that means that....private people are regulating themselves...scary thought...
HMW: "They would eventually need to sacrifice one of those things: the stock market, the housing market, the government or the dollar..." Everyone without watching another second: "GOVERNMENT, DUH!"
Ive been acting as if we’re going through hyperinflation getting rid of all dollars for crypto since January 2018. Id say things are coming along well. Doge got pretty close to a dollar thus making the dollar and fiat currency a meme.
@@notme9804 pretty damn well. Im retired. Despite crypto being down 50%+ across the board I’m still up multiple times from what I accumulated between 2018 and 2022. Helps that I bought bitcoin under 6k. I do remember 2$ bitcoin during the silk road days in college a decade ago. Prices spike, drop 75-85% and rebound. Same cycle since 2009.
@@Bonanzaking that's good to hear! Glad it's working out for you despite the bumps right now. I was really curious if the current situation had hit you hard but it seems your carrying along fine.
Could inflation help developed countries getting rid of their massive debt? Creditors are not going to be happy, but most of them already knows that (and owns profitable assets on top of gov.bonds), and also part of the debt is owned by the Fed. When people do not worry about the debt (it's not doomsday but still a problem) I think they do not consider the subtle way in which it acts, ex. preventing you to counter inflation since you wouldn't be able to to meet the interest payments.
If one has so much inflation that the government dept is gone, two things might happen. Your people (that have no house, shares or anything else) have less to spend and get poor. Your currency is getting worth less on international markets which in turn might lead foreign investors to only buy bonds if they are in a foreign currency so your government is getting dept that does not inflate which makes it harder to pay back if your currency gets less valuable. Oh and if your country relies on foreign goods it might hurt your economy really bad since foreign goods get hella expensive if your currency loses it's worth through inflation (only if you have really high/high inflation rates compared to the rest of the world though i think) If all dept is central bank and iland investor owned it might kinda work though. If it would happen in Japan for example it could work since most dept is held by japanese investors and the central bank (if my knowledge is correct) . You may correct me if I missed something or am plain wrong though ;)
If a government borrows in its own currency, as the US, Brazil, Russia, China, and many others do, then it actually doesn't have to worry about its debt, in the sense that it can never be forced to default. The government can always issue new Treasury securities or dollars to pay its debts. The US could print trillions of dollars tomorrow and buy up all its outstanding debt. But this would actually be a terrible thing. There's nothing wrong with the government holding debt; in fact, it SHOULD hold debt, since only when the public sector runs a deficit can the private sector have a surplus. You and I, and every business or country besides the US government, needs to go out and "get" dollars; but since the US government is the sole ISSUER of dollars, it is in the opposite position; dollars are the one thing it can never run out of, and what it needs to go out and "get" are our labor and resources, not our dollars. Imagine you run a household with 10 kids. You want those kids to do their chores, but you don't have anything to persuade them with. So you print up a bunch of "chore coupons" and promise to give one out for every hour that the kid works at chores (the number doesn't matter, it could be ten coupons, obviously you can just write or print as many as you want; we'll assume you are not constrained in the amount of paper or printer ink or whatever). The problem is, the kids don't want these chore coupons. Why would they? They can't use them for anything practical, and no one wants them so they can't trade them. So in order to get the kids to accept them in exchange for their hour of labor, you decide to institute a tax. At the end of every week, each kid must pay two coupons or he gets grounded. Suddenly the kids have an incentive to get the coupons from you, and we can imagine they all start off doing their two hours of chores to get exactly the coupons they need. Perhaps one of your kids, Michael, is particularly industrious. He's a good planner, and he realizes that he can easily do ten hours of chores in a week and then have enough coupons to pay his tax for weeks without working. Sherri, on the other hand, is a terrible procrastinator and is always right up against the coupon deadline with no coupons. You could find something for her to do to earn another coupon, but you don't have any chores left and you have arbitrarily decided not to give out more than 24 coupons a week - which is just barely more than what all the kids need to pay the tax. Fortunately for her, she's a really good artist, and Michael, who has a few of those extra coupons, trades her one for a minecraft drawing that he likes. Now Sherri doesn't have to do chores because Michael is doing hers for her, but he gets something out of it; everyone's doing what they're good at and they can all pay the tax. We have the beginnings of a beautiful economy! We have dollars (chore coupons), we have a tax, and we have people trading goods and services so that everybody gets what they want. Now, what gives the chore coupons value? Well, in this simple example, it becomes obvious: the tax. Without the tax, you can print as much currency as you like but no one will want it. With the tax, the coupons are "worth" not being grounded. You could also say they are worth an hour's worth of work, since that's the rate that you, the monopolist, set from the outset. However, we are still missing one key component: government borrowing. Let's say you get generous with the coupons. You give out, not 24, but 100 coupons. Your kids have learned to value these coupons, so they work many more hours than they need to because they know they can always use extra coupons to pay a future week's tax, or to trade with one of their siblings for goods or services or juicy perks like riding shotgun. In fact, they get so fiscally responsible that they are all piling up quite a surplus of these coupons. Now you make a deal with them; you tell them that for 10 coupons, they can buy a gold coupon. Gold coupons are special, because you promise to pay interest on them; every week, the holder of a gold coupon gets one regular chore coupon. After ten weeks, they get their original 10 chore coupons back as well. If your kids have any brains at all, they will jump at the chance to grab these gold coupons. So they are now the holders of your "public debt"; you are going to owe them chore coupons down the road. This analogy brings several things about our monetary operations into focus. First of all, you can plainly see that you can NEVER run out of chore coupons. You can always print as many as you want and give them out for whatever you want, and you can tax back as many as you want as well. You can also see that "borrowing" the chore coupons isn't strictly necessary at all. It will encourage your children to save, and it will reward them with free income for doing so. Maybe you see this as desirable - perhaps you want to reward Michael, who always does tons of chores way in advance, trades for others' coupons to have even more, and always has extra. However, you may ultimately get to a point where no one is doing chores at all - if Michael has twelve Gold coupons, he earns enough in interest every single week to pay for everybody else and still have some left over. Before long all the kids are just doing favors for Michael and nobody bothers doing your chores, and since Michael is still earning interest every week, you are constantly giving out more coupons than you are taking in in taxes. Now you are running a deficit, and Michael (and by extension everyone else in our little private economy) is running a surplus. Can you ever "run out" of coupons in this situation? Is your ballooning "debt" a problem in and of itself? Will there every come a time when Michael is unwilling to buy gold coupons? No, of course not. In fact you DESIGNED it that way - you wanted Michael and the others to save, which means you HAD to pay them more coupons than you would eventually collect in taxes. In fact, if you took in MORE coupons at the end of each week than you are giving out, you are very quickly going to have some kids who are involuntarily grounded; they would have been happy to work to earn the tax coupons, but you refused to offer them any, so they remain unemployed. This is what would happen (and indeed has happened) in the US when we run a budget surplus; money begins to disappear from the economy and we quickly get into recession until our government has to good sense to start spending at a deficit again. The last two times we ran a sustained surplus in the US were in the 20's and 90's, and both periods saw a contraction of public debt, a corresponding expansion of private credit, and eventual depression and recession respectively, expressed most fully in the phenomenon of high unemployment. Should you be paying Michael interest? A far more intriguing question - I would actually say no, but obviously that is going to be very unpopular with Michael and anyone else who has gotten used to their gold coupons paying free interest, so if you have started doing so it's going to be quite, quite politically unpopular to stop. But since you are the dictator of this microeconomy, you can pay out as many coupons as you want for anything your kids are willing to earn them for; you can tax them at any rate you want, and you can issue as many gold coupons you want paying whatever rate of interest you like. You have established a sovereign currency. If you want to get rid of the debt, it means buying up all the gold coupons out there. Michael probably won't be happy when you force him to give you back the gold coupons in exchange for regular coupons, but he has no choice. You can sell him more debt, or you can buy all of it back, it's up to you. For countries that borrow in foreign currencies of course, this is not an option. If Haiti owes 100 billion in USD, it can't just print the money like the US government can, it has to borrow it, or tax it, or sell something in exchange for it. If it prints more of its own dollars, and uses them to try and buy up dollars (or some other limited resource like gold), it will only drive the price of its own currency down relative to the dollar or gold or whatever it's buying. This is what happened to the Weimar republic, but it cannot happen to the US or other "sovereign currency" nations. Sorry this spiraled into a whole crazy Ted talk lol. But I think people get so used to seeing money from our perspective that it's hard to remember that governments have a completely different relationship to money and debt. They are tools of the public purpose, tools that the government uses to get things done, whether that's fighting a war, making investments in the economy, single-payer healthcare, or whatever. It's all just chores, coupons, and taxes.
@@tiberiusalexander6339 Your thought experiment is definitely interesting, however it is approximate at best to assert that the only factor driving a currency are taxes. This is a misunderstanding of the concept of money, and unfortunately MMTers seem uncapable of getting over this delusional dream of theirs
In this case, the government would make it easier for itself to pay off the debt. However, creditors do not like this and will be more hesistant to borrow out money to such a country.
Though that's even more reason to not let the mortgages pop through falling home prices which force "owners" to sell the house they are living in or (given it's a variable interest loan or a loan with a shorter time period so one has to get a new one) are forced to sell due to inability to pay back that said loan.
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"I hate dragging out the answer!"
The 1% of the 1% of the good youtubers who know what they're doing.
If a video is 10-11 minutes, it's dragged out 99% of the time.
@@rattlehead999 he gave you sn answer straight up and then gave you the choice to watch rhe rest…
@@jacobconcannon4677 White knighting doesn't change the fact that the video could have been 3-4 minutes.
Pretty sure its a bit of a joke on the idea that you can sum up a complicated subject. You can take it but you shouldn't.
Does the the covid vaccine stop covid? No. Instead it reduces the hospitalizaton rate by 99% and prevents severe cases which is very similar to stopping covid.
@@MaestroAlvis What you just said about the vaccine is what some videos say in 10-20 minutes, which is exactly my point.
Empty words to pad the video to a certain length.
Come to think of it, I am quiet happy NOT being the chairman of the fed right now TYVM.
Still waiting for the Fed to be abolished. We need a truly free market.
Did you mean quite?
To the contrary, I'd rather they make me the chairman, so I can divert more real wealth into my own pockets. You are giving too much credit to the FED, as though it is actually an establishment by the people for the people. The only reason why the USD lasted this long was because USA won both the world wars and USSR collapsed on itself (USA didn't really win the cold war, Ronald Reagan led Gorbachev for a ride). But now that the real powers in the world are shifting, there is no way the USD can last.
Break up Big Companies, Pass the Pro Act, End Corporate Welfare.
Sacrifice the stock market. My generation isn’t really invested in it and the BabyBoomers ran up the debt and benefit most from the stock market.
Finally, someone who actually explains why inflation hurts the stock market and why we're in so much debt
What debt?
@Don You are forgetting the concept of stagflation, when inflation is high but growth is not. This is what happened in America during the 1970s.
@Don
Thats bs
There is no housing market. The housing market is dead. Why is this person talking about the housing market for a good portion of the video???
@@m4d_al3x well it sounds like because they actually understand what they're talking about unlike you
Hope you catch an algorithm break. Your content is too good, and hope it happens soon.
I think I have been very lucky recently on that front, I am actually hoping it stays like this :)
@@HowMoneyWorks I found you randomly on my feed
@@White90ice same
The channel has gained like 50k subs in 2 weeks. He’s doing okay.
Indeed
I'll add that, to my understanding, the Fed recently has expressed an interest in having HIGHER inflation coupled with very low interest rates, because this makes it easier to service the national debt. That being said, the economy is now so dysfunctional that it likely can't sustain high inflation. As we've seen, inflation has rarely risen above 3% since the GFC in 2009 because most of the money is concentrated in a few hands. The current 5% we're seeing is likely just a statistical artifact caused by the pandemic: production forced offline and people delaying purchases for more than a year.
On the other hand, if you don't already own a home, inflation is out of control. Housing, healthcare, and higher education costs are rising 2-3 times faster than the CPI. In fact, last year the average gross income was LESS than the amount that housing prices increased on average. Meaning, if you had saved every dollar you earned as an average American, you would be no closer to owning a home at the end of the year. It's a miraculous economic failure. Our leaders are gods of failure.
The extent to which the government and the fed protect the home as investment meme is disgusting. At least, I can say that as someone who would have liked to purchase a home in the next few years. If homes were seen as something more like a car, or at least value neutral, we might not have such a problem. But that would be a huge shift for literally everyone in the country and voters would hate it.
@@PasDeMD Homes appreciate in value because they aren't making any more land. Land is just about the simplest investment to understand.
@@maxcarren112 land appreciates in value yes. But the attitude to the building on it has shifted from net neutral to net gains being desired. It makes the working class more mobile because your not loosing money each time you move but if you don't own a house it makes it near impossible to get in with the stagnant wages once inflation is accounted for.
@@maxcarren112 There's tons of land that could be developed in the US. They just won't let you build on most of it. And in places where you can build, the building restrictions are so onerous that low income people don't stand a chance. In the olden days you'd just throw up a log cabin in your first year, and gradually work your way up to building a proper house. Now they expect everyone to be ready to build a proper house right out of the womb and comply with 1000s of pages of code and have tens of thousands of dollars set aside for useless permit and inspection fees.
@@PasDeMD We really need to move away from homes being considered an investment. It's bad for everyone except flippers and developers. It's especially bad for the economy as it just ties up what could otherwise be productive money in a physical asset that is only appreciating due to supply/demand imbalances (real or otherwise).
I'm a home owner and if prices dropped 30% over the next year the main impact this would have is that it would be cheaper for me to buy a nicer home as the price difference between my current property and a more expensive one would be less in absolute terms.
This reminds me of that quote from Doctor Strange.
"The bill always comes due."
yeah we need dr. strange to save us
An old adage, predating even Kipling's more brutal rendition: "The Gods of the Copybook Headings with terror and slaughter return!".
The William inevitably arrives on time
Mordo said it.
@@me1970 I meant Doctor Strange the movie.
"It's not gonna be Zimbabwe" should be a classic comedy line
Surly the Weimar Republic would be way more apt a comparison here. All the way down to its eventual fall into dictatorship.
@Vercusgames I don't see anywhere that that's true. In any circumstance. $1 is $20 absolutely nowhere in the US.
@Vercusgames that money isn't getting printed immediately. Its going to be over 10 years. And I know that the money supply has been 45% printed since the pandemic. GDP was 21T in 2019. We managed to print 5.5T in a year from stimulus packages.
It's not gonna be Zaire.
@@HH-le1vi No sadly it will likely be a lot worse than that. Not that it already isn't. The problem is we are to blind to see past our own noses.
Perhaps the question to ask is what could 10$ get you 10 Years ago, that has since doubbled since then?
I guess havig lived in D-Mark post Teuro (German pun Expensive + Euro), it was easier to feel the strength of the Mark even if it was 1/2 the value of an Euro Coin. You still managed to pruchase twice as much with it, and the Euros been sinking ever since.
"It can be fixed tomorrow, but it would be painful" Milton Friedmen pulls up a chair.
And then slips on a banana
And then shoots a small Chilean child.
painful for who? bad for who? that is my question when all these statements are made. It's not bad for me. We've been tricked in to believing these things by an org run by banks.
Milton would say the economy is sick. It needs to take medicine. But ppl don't like to take medicine because it doesn't taste good and you still have to go through a rough period before you get better.
The economy has a solution, but nobody wants to take the medicine because they are afraid of the cost to get better at the moment.
@@ep103103 As a Chilean, just stop with the disinformation.
Here from the future. It's bad
you were right. Its so much worse now in 2024
I'm an aspiring banking lawyer and i was talking about the Argentinian economy with a friend who is studying political science and we realized that even if this past 2 years we have seen high inflation (as per usual) the worst is yet to come, during the pandemic the demand for pesos has risen as people whos salaries where slashed or lost their jobs started selling their savings in dollars to afford the costs of living, thus the continuous money printing from the government has not yet shown its full inflationary power, as soon as the job situation stabilizes again and people start trying to buy dollars again, we will either be left with a ridiculous surplus of pesos with no demand or the need of quantitative tightening
Last month Argentine gov printed enough bills to increase the monetary base around 7%. 180.000 millon pesos out the fin air just to pay statal salaries.
I worked at a Bank in Argentina (mostly in cash solution projects), and despite what most people believe, the demand of pesos keeps growing as more people turn into the informal economy. Even with the apparition of digital wallets more and more individuals prefer to work with cash. Its silly, but the market wants cash (lots of it!).
You would be amazed to hear how Argentine banks "trade" bills between each order to avoid cash transportation fees. High cash income (money comes in) banks "PAY" to other banks if they come to collect excess cash, and high cash output (money goes out) banks want to buy cheap cash in order to avoid asking for new bills to the central bank.
They said they wouldn't increase rates until 2023, yet somehow that means they are fighting inflation.
Because expectations can affect the efficiency of monetary policy. You can find this in any Blanchard textbook about macroeconomics.
Huh, the rent in my area doubled in the last four months alone, food tripled, medical care doubled, the only thing that got cheaper was my phone bill for some reason. Gee, I wonder why I think we're in a full tilt case of inflation.
food tripled? no joke food prices are going up but exaggerations like that dont help solve the problem
Rent you can blame government for as well with the illegal moratoriums.
@@bobnothing4921 Not really. My last landlord wasn't exactly hiding why he was raising the rent: he could charge northerners twice what he'd get out of the locals, so he was raising the rent high enough to force them out. (He's thinks he's very clever for someone whose office walls aren't all that thick.)
This isn't a new phenomena in my part of the country, only the severity of it is different.
Maybe when you learn inflation is not your individual experience of one local area of price changes, aka take any high school level economics class, you'll realize why you sound dumb
First video I’ve seen of yours, does a great job of laying out information in depth but in a clear way so that it feels only like surface information. Really effective and useful!
I’m going into my 3rd year of finance at university, and the summer break has felt so long without this kind of content all day
This is more economics than finance, though.
Sadly you'll probably learn more here than at your University. First question you should ask of all your professors on the first day, find out if they've ever actually held a job in the field that they teach.
@@bobnothing4921 I assume you don't have a degree and that you're speaking from a position of zero experience yourself...?
@@CSpottsGaming What exactly is so offensive to you that I suggested asking a very rational question? Does this mean that you're a professor who's never held a private sector job in your field?
@@bobnothing4921 Nope, I'm a Master's of Finance student who worked in the oil and gas industry prior to this. I've gotten my hands dirty.
There are plenty of valid criticisms you can direct toward the education system it's just that in my experience the people who vocally rail against it when *no one asked* are also desperate to justify their decision not to get educated.
And to be clear, it doesn't need justification. But it does scream "insecurity".
I run a small manufacturing business. My plastics and metals material prices have all increased this year, between 25 and 70%. Makes me scratch my head when I hear inflation "might" be 2-3%.
Don’t you know - everyone buys a PlayStation 5 and a Blu-ray player every month..
That's a supply issue not a monetary one. The prices are reflecting supply literally just capitalism 101
@Obese Kermit yeah, the problem is the supply of US dollars
The inflation number quoted is the Consumer Price Index. As a manufacturer you are not a consumer, and therefore the price you pay for raw materials has no bearing.
Another great video.
The problem is and has always been, that the lawmakers and government big wigs dont understand basic economics, unless of course it's the economy of their own bank accounts.
They certainly understand that last part pretty well aye Nadeem ;)
I totally DISagree. They KNOW what's going on and are trying everything they can to hike up inflation and keep it there as long as we're all unable to afford basics,. They have us by the necks and we have no power to change our situation .
@@HowMoneyWorks What about switching from dollar in currency to stop Inflation.
"We understand our job. We do our job."
Yeah...sure...
To be fair I say the same thing to my boss every day
I mean we all knew biden would cause inflation for the green new deal
Everything you don't have to do seems much easier than it actually is...
@@shayanroychoudhury9066 this. the number of people who actually need to work on those scales and systems is pretty small, it is a highly specialized skillset. If one looks at experts with decades of experience in an esoteric field and says 'they are not doing what I, with my zero years experience would do!', it probably is not the expert that doesn't know their job.
@@jai-kk5uu if only he wanted a green new deal :(
refreshingly honest and educational (for me anyway) content. it's criminal how little of this crucial area of our lives is covered in high schools and how deviously one sided any/all coverage of it is (corporate friendly version ONLY) by our nation's corporate media outlets.
a community having exposure to a range of genuinely varied viewpoints on a given subject renders propaganda on that subject useless, or at least easily recognised by the community and filtered accordingly.
Would love to see a video on the 1970's stagflation and how we are similar/different to that time.
Wow totally underrated channel. Explains so well and in such detail. Channel needs to be popularized.
Can you explain what about a housing price drop would be devastating exactly? It's not like people are thrown out of their home, they still get to live in it , plus they now pay lower property taxes. To a homeowner, the value of the house they live in is different from its market value
A lot of people don't just have a mortgage - they're in so deep that any drop in home values will put them underwater. Which means they can't move unless they can put up cash to cover the difference.
Also, many are dependent on lines of credit, which require their home value to continually rise (thus, opening up room for more credit).
@@iloveprivacy8167 sounds like a system that's bound to collapse in on itself sooner or later anyway. In Europe most people buy one home and live there until they die, so what would be the argument against raising interest to control inflation here?
@@majorfallacy5926 It is not hyper inflation that requires an immediate fix.
@@yansakuya1 So we should just risk it then? Inflation is harder to control the longer you leave it and the higher it is.
Its bad because all the suckers who bought in the last year or two will be holding loans which the collateral(House) doesn't cover as the price of the property went down.
Inflation and the national debt could be eliminated in less than a year very easily. The problem is that the person who tries to do just that would go the way of Lincoln and Kennedy. The last two people who tried to eliminate the bankers' bottomless well of free money.
The us government doesn’t have 28.5 trillion dollars hanging around. I believe tax revenue was 4.5 trillion last fiscal year. So if we shut down all operations of the federal government to pay off the debt, there’s still roughly 24 trillion dollars of debt outstanding
@@mikedonnelly5775 You don't know enough about how our money system works, so I'll explain the steps that will do just what I said.
*_1. REVOKE THE FEDERAL RESERVE ACT AND NATIONALIZE ALL THE FED'S ASSETS_*
--- This allows the government to stop digging the debt hole and to get the FED (the source of the problem) out of the way. Our money is debt. Keep that in mind.
*_2. PASS A BALANCED BUDGET AMENDMENT_*
--- This will prevent congress from just spending willy nilly on everything they could possibly want. Just because you CAN print all the money you could ever want does not mean that it is fiscally responsible.
*_3. REPLACE EVERY FEDERAL RESERVE NOTE WITH NON INTEREST BEARING UNITED STATES NOTES_*
--- Lincoln used debt free Greenbacks. Kennedy used United States Notes. Both were killed because the banking cabal wasn;t getting their cut. When all the Federal Reserve Notes and treasuries are swapped out, the debt is paid and GONE. The congress has Constitutional powers to create all the money it needs to promote healthy commerce. Replacing crap money with good money falls within that mandate and is 100% legal and ethical as well.
Yes, all three of these can be done in less than a year. When there are no more Federal Reserve Notes in circulation and their value has been zeroed out (after the exchange window of time) then there is no more national debt.
@@tylerdurden639 1. you need to revisit the FED's balance sheet. It's currently 8.5 trillion, 8.5 trillion is not 28.5 trillion.
2. I agree don't know where you insinuated that I was against this.
3. That's not true. Congrees can't create money. Constitution aricle 1 section 10 “no state…shall make any Thing but gold and silver Coin a Tender in Payment of Debts.” so they need currency to be back by gold and silver and can't print money.
I want the FED gone too. I read the creature from jekyll island.
@@mikedonnelly5775 Watch The Money Masters. You will understand the steps I listed above.
I WISH the houses in my area only went up 20% from last year. Chilling at a nice 42% atm
This is the best finance channel on all of TH-cam. Superb work!
Sorry but sadly the housing market will need to crash now or it will be a bigger crash down the line.
Agreed. Housing prices in South FL are crazy high vs 2 years ago. Unaffordable.
They could also begin selectively forgiving the debt they have on their books, This would keep the money they have produced in circulation while relieving that financial burden from small and medium businesses or home owners that they hold the debt for. This in turn will free up the money those businesses and consumers have and make the financial impacts of correcting inflation less painful.
With general prices increasing, it had became harder and harder for any small business owners to operate. The increase in the assets of stock market and real estates have made it nearly impossible for poor people to do anything at this point
This channel is well researched and the content is clear. Great work!
One problem with this is we are now a globalised economy. Meaning we purchase allot of goods from other countries in which their services can be very cheap thus making our products cheap. So we might see some deflation in some products.
Great and clear explanations, all well laid out and connecting dots that usually are left loose in other videos. Congrats! Very well done material you have here, my friend influencer.
1) That's not how you should treat an angry bear.
2) The frequency of this kind of disruption is a sign that the entire system isn't very good, no?
**"Angry bear" is actually an Herbivore directly representing the world's greatest Mercantile dynasties for the last 3000 years**
Well, the system does need a lot of improvement, but why we have said system is because other systems collapsed and this one stayed. There is no perfect system until there are perfect people, and since we will never have the latter, well...
@@SamGarcia "collapsed" is doing a ton of heavy lifting. So what do we do now that this one is collapsing, given we still don't have "perfect people"?
No, it's not. I've lived through three "once in a lifetime" economic collapses in the last 15 years alone.
@@SkySong6161 I've been fairly convinced that the powers that be were secretly hoping for the end of the world in 2000 and then 2012 so they could continue burning the candle at both ends without any concern for the future.
Keep up with the good video man it's making sense too me when you simplify everything
Inflation is like needing sleep. Doesn't matter how many rebulls you drink or amphetamines you down, sooner or later....you....must....sleep.
They are going to have to just let it crash and if they don't well it will grind to a hault which is far worse.
Dude.... I'm right there with you. I live in South City and my rent for a bedroom is $900.
For housing prices. A drop in prices only screws over those that bought in the last year or two. Houses aren't speculative investments, they are a store of value and a necessity for citizens (whether buying or renting, cheaper list price means cheaper rent).
Point is like 95% of the population benefits, and a little more if it's not as profitable to construct houses.
In normal be times, yeah, more money for consumer spending. And realistically, buyers are screwed for a few years anyway because of closely costs. There are also equity and mortgage REIT they said get hit, and cause some ripply affect.
But, currently, we are at record low inventory, for basically all consumer goods. We are starting to see housing inventory grow, but supply is still at historic lows. Supply chains are so screwed up right now, that if that money doesn't go towards housing it will probably just find it's way into another assest.
A drop in price is still ok if wages climb with inflation. The only people it would suck for is people selling within a few years after buying.
Technically they are speculative. Just very safe
I didn't realise you had "only" 100k subscribers until this video, I had already watched to other videos of yours and believed you were one of those big channels with over 1mi subscribers. Very good quality content! (and don't worry, you'll become one of the big ones very soon :) )
You are forgetting one factor: Other countries have their reserves in US dollars. People all over the world have their savings in US dollars.
This means that the USA will be charging trillions of dollars in "inflation tax" to other countries, to spend that money discretionally within the USA. What happens is the rest of the world says "fuck it, I'm switching to euros" ?
Anyone keeping their savings in usd deserves to lose it tbh
@@TotoGeenen Like, most of the world?
@@SalveMonesvol such as?
@@TotoGeenen Most countries have their reserves in US dollars!
Crypto has entered the chat
I don't understand why collapsing property prices would "hurt" homeowners. If you own that house to live in, it doesn't matter how the market goes as long as you could afford it when you bought it.
It only affects speculators.
Not everyone lives in the same home their entire lives. Also sometimes you might just need to liquidate your house in case of an emergency because life happens.
But then when you sell you're buying into the same deflated market.
@@almisami Buying and selling houses is not an instantaneous process. There are fluctuations that happen in between deals.
@@MinecraftMasterNo1 You typically sell first and then buy later, decreasing cost actually makes it cheaper.
@@MinecraftMasterNo1 and that's a risk you're supposed to consider before purchasing. Nobody who can't take that hit should have bought in the last two years, and especially not now.
Thank you for all this useful information! Hopefully people don’t take this for granted
You are welcome, thanks for watching :)
Very accurate video, except for the last part in which you predict inflation will probably not rise above or far above 2% in the US (which we now know it did). Not a shame though because almost nobody saw this coming after such a long period of low inflation. You could have also mentioned just to stop quantitative easing without quantitative tightening as the practice itself is of questionable moral. Quantitative tightening is quite an unrealistic in the economy of western countries these days. What we see now instead is that the FED has chosen to gradually increade interest rates. (But is still doing quatintitative easing?!!!)
I don't know what circles you're running in, but to everyone I know this inflation was so obvious. If you shut down half the economy while at the same time handing out trillions in stimmy cheques to everyone, there was only one possible outcome. Inflation is just too many dollars chasing too few goods. Hell, even the timeline was predictable. 1-2 year time lag.
@@zackp8201 Ikr?
Maybe he's just trying to give the "at least you tried" cake to HMW.
Everyone and their aunt saw high inflation coming!
I'm particularly interested in the gold market, and damn! Even with such high interest rates, gold is already climbing back up!
In previous years, this would have put a dent in the gold market for at least a couple of years.
Maybe it's too early to say that the gold market is climbing up...maybe it's just my own bias, we'll see about that.
But I think an 8% inflation rate is still cartoonishly low compared to what happened in the past 3 years.
It's all going down.
Edit: It's actually 9.1%...this can absolutely not be good! They'll either have to increase interest rates faster and halt the economy, or keep it slow, accepting record high inflation for a couple of years at least (which will still probably break the system as well, probably what they'll try to pull).
I recommend watching Mike Maloney's hidden secrets of money, really helps you understand the system.
@@abdelkarim8381 That time when the music plays: "It's a small world after all, It's a small world after all...."
Damn man. Pretty good insight into how government asset purchasing works. Thanks 👍🏼
A channel that deserves more growth! Please continue the high quality content that I have to slow down at times to fully understand.
I am okay with any amount of collateral damage resulting from the total collapse of the real estate market. No price is too high to pay. 100% unsympathetic.
I own a house and still agree with you. It's too selfish to want my asset to double every 5 years for my own good... Because that means that all future generations will be completely screwed.
Also, if it crashes, I can still end up on top. Let's say my house is worth 500K now, and my dream house is 800K. That's a 300K difference. Now let's say the market drops 50%. My house is worth 250K, but my dream house is only 400K, so only a 150K difference. That means I'll have a better chance to upgrade. So actually, anyone who owns 0-1 homes (85% of the population) will be better off if the market crashes.
Only the people who over-borrowed to buy their house will lose, and they brought it on themselves by wanting to own at all costs while prices were soaring.
Houses should act like cars and depreciate in value the older they get... But for some reason, it's the opposite. It's the only physical asset in the used market that appreciates.
@@shane250 Houses do depreciate; however the land that the house sits on is what appreciates. If you buy a mobile home and lease the underlying land that it's parked on, that home will go down in value.
I wholeheartedly agree with you on the 500K to 800K house analogy. In an ideal world housing prices would stay flat. We don't want a crash because if there's a crash, then homebuilders won't have financial incentive to build more homes, exacerbating the shortage (which is why the housing market won't crash anytime in the foreseeable future).
@@michaelhunsinger8351
I get what you're saying about the building industry, and you're probably right.
About the land vs house appreciating... That's irrelevant to the buyers themselves, it also doesn't calculate as such.
If it was completely true, a new-build would have been almost 2X the price of a different (old) house in the same area. Right now, they are more expensive, but only by 10%-20%. If that's the depreciation on materials for 50 years of usage... It still doesn't make any sense.
Another thing is, if the housing market collapse, the state would have to sell land for cheaper, and the builders would still make money, just not as much as they got used to make.
B a s e d
@@shane250 The state sells land? I believe most land is held privately and transferred (sold) privately. How does land appreciating not affect the owner? If you buy land for $50,000 and it's later worth $100,000, that affects you; it could obviously go down to $1,000 too if something happens to reduce demand in your area. The age of the structure doesn't matter necessarily, but the CONDITION/required maintenance will matter. I don't care that my concrete walls are 40 years old. If they are cracked and need repair, those costs/risks will go into the value of the home.
As a TH-cam Premium member, I appreciate the lack of a 'like and subscribe' call.
That’s precisely why I like and subscribe.
Ues Sponsor Block add-on if you are watching TH-cam on a PC
@@AnanthakrishnanThachilath what's that?
@@AnanthakrishnanThachilath whats that
@Elias Productions damn that’s impressive, how does it tell to skip accurately do you know?
IMO the scariest economic outcome is that we go on kicking the can down the road and pretending like everything is hunky dory. The global economic system is completely dysfunctional and if fixing it means pain for the property owning class, then so be it. They chose to hitch their future to this ride, so they deserve to face the consequences. The alternative is to pass these problems off to less fortunate, younger people. The young and poor have already been suffering for many years, and every year it gets worse for them.
Widespread devastation IS the solution. And this time there should be absolutely no bailouts. Those on the top need to feel severe pain to reset this broken system. It's time to take your medicine and stop pushing problems onto future generations.
Sorry you don't own property, but that's your problem. Don't have kids you can't afford.
You smoking crack? You sound like Robin Hood. Rich people won't enact policies that hurt rich people. The poor are screwed.
Keep up the good work. Our family loves your content!
Thanks for watching. Leave me a msg
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Sacrifice one of the 4: Stock, Housing, Government or Dollar. And i think we all know what answer they will pick. Option 5: NONE OF THE ABOVE! RAISE TAXES!
Jokes aside, nice to know.
Do you have an economics degree, I am currently studying it in highschool in Australia and I just wanted to say your video is the first fed related video that's either close or bang on the theory of interest rates and omo that is made by an individual content creator, your channel is fantastic and outside of one or two not so good videos. You are one of the first genuinely decent economics youtubers outside of economics explained, keep up the awesome work
economics explained is dogshit, his channel is banned on multiple econ subreddits, and some of his videos are filled with missinformation. If you wana study Econ, study econ, but don't fall for charlatan's who have an interest in spewing garbage for clicks
Can you talk about the great resignation? Also good content!
loved the hit agains the infographics show. and obviously the video, very interesting as usual
0:28 earned you my subscription
I do what I can :)
Congrats for 100k 🤗
According to neoclassic growth model, technology/innovation improvements lead to deflation and economic growth, which is what the US experienced during the dot com boom. That can definitely offset the money printing effects as there is more economic capacity.
"It's not ideal but it's not going to be Zimbabwe" I love that line.
they give this money to themselves and buy stuff for free at the nation's expense
it's a literally a Back-Door tax on the Poor.
hehe, money printer go brrr
@@iller3 it's a me a mario
That’s not how it works, it’s printed because people have a demand for it.
@@ParadiseLordRyu I'm not sure I follow, why would people have demand for an action that not only doesn't directly help them, but devalues their already existing dollars?
All economics explained fans need to follow this guy
How Many Works.
You left us with a Key Question:
IS there a limit to the amount of Debt the Reserve Bank can buy before it and our economy Go Boom, and how/why is that Limit??
Some smart people have speculated it's tied to our National Debt running over 30 trillion _(SOON™)_ ... but the more technical answer to that is actually baked into something called the "Compounding Interest ON our Debt" which obviously the Fed itself has kind of sort of an equivalent metric to as well since it deals so heavily in Treasuries & swaps.
You'd have to look at Japan's overleveraging rate they have to deal with (200%???) to get a better idea of just how far that Rubber band can be stretched. Either way, their Birth rates are already a notorious problem so regardless of what the bean-counters all say is "fine", there's actual Societal side effects that get baked into the national Psyche of people who know that their "Stimulus" has failed and they do not actually posses the Drill that shall Pierce the Heavens
Damn the whole time i thought this was from today!
Great work.
Please do a video on how the eviction moratorium will effect the economy long term.
Yo your videos are A1! Thank you! 🙏
"within the next few months"
Delta-lambda-omega-beta-tetra has joined the conversation
Great content, thank you!
It seems to me that this line of reasoning misses the point. Sacrificing the dollar means sacrificing _all_ of the other things. If the dollar drops in value, people won't be able to buy stocks, so stock prices will eventually collapse from a lack of demand. If the dollar drops in value, people won't be able to buy houses, so housing prices will collapse from a lack of demand. If the dollar drops in value, the government won't be able to make purchases and its payouts will be worthless, so all its services will lose their effectiveness. This isn't a trade off; it's just a delaying tactic that actually makes the ultimate unavoidable outcome bigger and more catastrophic.
How Money Works, you should do a segment on how medical insurance money gets distributed and who receives it.
When the Volcker fed attached inflation in the early 80's it was a different world. Corporations paid a much fairer amount in taxes. Workers actually still had rights. Debt was 30% if gdp not 130%. Moral hazard hadn't been practiced for decades. Our demographics were MUCH better. It's not looking good as currency debasement and inflation become structural.
So true
Hurting auto makers and dealers
Me: You sold me. Do it.
If I work from Europe for US companies, does this mean I should be more agressevly looking for raises?
Nah, just means you should look for a new employer cause the next bubble is about to burst
That depends on how foreseeable it is that your job will either be automated or sent to India. Just ask people who used to work in call centers. Remember when USA companies had call centers in the USA? Those days are long gone.
In Canada, housing costs have more than doubled over the last year. Forget 30% increase....a house that sold for 300k in 2019, has now sold for almost 700k a month ago. Houses that would have sold for 200-300k 5 years ago are now being listed at 500k and selling above 700k. Be thankful 30% increase is all ya see. I bought a house with my mom in 2008 for 138k, life happened and my mom sold the house for 190k in 2012, that same house is now being listed for 436k...and I know the new owners personally and they have done ZERO upgrades. Have done ZERO maintenance. Be grateful your country is dealing with this issue
FED should just buy state bonds to fund infastructure with positive real value. Simple. Solved America. I'd like to pay $5.95 for express shipping on my Noble Price.
Sneed
Best I can do is an internet love heart... and I'm taking all the risk here.
Thank you for your channel
"If we see inflating moving material above 2% in a persistent way..." Dude do you buy anything?
Funny how millonaires seemed to just have discovered inflation now, when shopping for 3rd and 4th homes and boats.
They never asked regular folk about "2% inflation" because for us childcare, healthcare, rent, cars, higher education, all of it rises WAYYYY more than 2 percent annually and we don't see any of the income increases.. yet no one on CNBC cares to talk about it because they never even have to think about affordability of such blue collar, everyday expenses.
Actual billonaires, who have added over a trillion dollars since the march 2020 lows, are complaining about FED policy and inflation the most!!!
The freaking nerve of these people.
So basically, the head of federal reserve, could just say, we are expecting to see inflation go down. Then soon after(ie a couple of months), the reserve, will see it go down, not by a lot, however, if this process was repeated, with “data” that show inflation going down, then you might actually have situations where the inflation drops a lot. Also stop printing money, that might actually help as well.
@Don That’s what the process is called, when the federal bank, creates new dollars digitally, it relates back to the olden days where, they actually physically print cash in hand, I mean they still do to some degree for ATM machines, and other things, extra.
@Don spending less on the housing market would bring prices down, and would allow the people who couldn’t get on the housing ladder, by there own property. The reason prices are so high, because there is a high demand for people buying property. In the Uk, they have a housing shortage issue, which is making the prices shoot up. If you told people that inflation was going down, people would wait until prices would drop, and so there would be less demand on the market, and by the time inflation has gone down, more houses and properties will have been built. Allowing people to buy property at lower prices.
7:47
businesses going bust also decreases competition within their area/sector, which leads to remaining businesses hiking prices...inflation.
just look at Louis Rossmann's NYC tours. shit ain't EVER going back to the way it was!
Depends how was it? It's New York. It will recover... It is recovering now, with le petit Napoleon Cuomo gone, it might recover a bit faster now. But, if people are still stupid enough to vote these 🤡🤡🤡 in, Como, DeBlasio, AO(Cowfarts)C, to name a few. Then what hope does Mr. Rossmann have?
Love that you imidiatly get to the point!!
The Feds don't like getting exposed
Bro here in NZ we’ve had 7% inflation 💀. R we even a first world country at this point?
Doing nothing while inflation destroys people’s savings accounts and retirements
Savings accounts shouldn't be how one prepares for retirement anyways, needs to go to more valuable assets.
Some of these problems do not exist in a cash economy. I live in Africa, we pay cash for everything, not mortgage, you can either afford something or you can't.
On top of wanting the Federal Reserve, as it stands now, abolished, I think that the crisis from 2008-09 should have been allowed to come to fruition without government intervention and bailouts. I think that ultimately letting those events run naturally would have been better overall than the situation we now find ourselves in. Unfortunately, we won't truly know if that's the case.
That’s the way the Free Market in Free Enterprise is supposed to work. Those who are not prepared to handle crashes, disasters, or changing consumer desires will not last. Sears, Montgomery Wards, CompUSA, and Fry’s ended due to inability to adapt to Free Market changes. Circuit Cty, MySpace, OshKosh, and Craftsman were bought out by their competitors.
Getting rid of the fed would mean no endless money for the military industrial complex. Fed was created in part so W. Wilson could buy his army with fiat dollars. No Fed no endless wars.
Killer work bro
'Inflation is a tax that nobody votes for but that everybody pays.'
-Milton Friedman
So, in order for the economy to not collapse, housing prices must remain very overpriced? Sounds crazy.
“Federal reserve is a very interesting institution.” Yah but it’s not a government institution.
The Federal Reserve, is as Federal, as Federal Express.
Capitalism is too unstable for there not to be a federal reserve
That's the entire fucking point. It's a entity technically owned by the banks of the United States, that regulates banks and helps them maintain a stable currency between them.
Before the federal reserve every bank issued its own currency. We used to have thousands of currencies.
Keeping it separate from government is extremely important because politicians will just feel pressure to blast the money printer and get us into inflation spirals, because Democracy doesn't work and everyone wants free shit paid for by everyone else.
@@flakgun153 But you know that banks in USA are private and owned by private people...that means that....private people are regulating themselves...scary thought...
@@teemumiettinen7250 better than politicians, smooth brain
Houses in Bozeman Montana have gone up on average about 75%, and downtown about 250% over 2 years
Watching your content just leads me to believe that money causes more problems than it's worth.
It’s brought us this far, but I agree it’s time to try new systems for production
Me, an Austrian, watching this Keynesian house of sand totter while I’m trapped inside: Hah, I’m in danger.
HMW: "They would eventually need to sacrifice one of those things: the stock market, the housing market, the government or the dollar..."
Everyone without watching another second: "GOVERNMENT, DUH!"
I vote we crash all of them
U nailed it!
Always enjoy your videos.
Got some recommendations
for you,Leave me a msg
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Ive been acting as if we’re going through hyperinflation getting rid of all dollars for crypto since January 2018. Id say things are coming along well. Doge got pretty close to a dollar thus making the dollar and fiat currency a meme.
Just curious, how is that going for you?
@@notme9804 pretty damn well. Im retired. Despite crypto being down 50%+ across the board I’m still up multiple times from what I accumulated between 2018 and 2022. Helps that I bought bitcoin under 6k.
I do remember 2$ bitcoin during the silk road days in college a decade ago. Prices spike, drop 75-85% and rebound. Same cycle since 2009.
@@Bonanzaking that's good to hear! Glad it's working out for you despite the bumps right now.
I was really curious if the current situation had hit you hard but it seems your carrying along fine.
We are the fools that dig a hole too deep to get out, cut the branch we are sitting on, build walls around and forget the door.
End the fed. Stop all deficit spending. Cut the federal govt by 50%.
Great video... can you do an inflation update for 2023 video??
Could inflation help developed countries getting rid of their massive debt? Creditors are not going to be happy, but most of them already knows that (and owns profitable assets on top of gov.bonds), and also part of the debt is owned by the Fed. When people do not worry about the debt (it's not doomsday but still a problem) I think they do not consider the subtle way in which it acts, ex. preventing you to counter inflation since you wouldn't be able to to meet the interest payments.
I mean sure, that's how govts get rid of their debt generally. But when you think about who will face the consequences, you realize it's just unfair
If one has so much inflation that the government dept is gone, two things might happen. Your people (that have no house, shares or anything else) have less to spend and get poor. Your currency is getting worth less on international markets which in turn might lead foreign investors to only buy bonds if they are in a foreign currency so your government is getting dept that does not inflate which makes it harder to pay back if your currency gets less valuable.
Oh and if your country relies on foreign goods it might hurt your economy really bad since foreign goods get hella expensive if your currency loses it's worth through inflation (only if you have really high/high inflation rates compared to the rest of the world though i think)
If all dept is central bank and iland investor owned it might kinda work though.
If it would happen in Japan for example it could work since most dept is held by japanese investors and the central bank (if my knowledge is correct) .
You may correct me if I missed something or am plain wrong though ;)
If a government borrows in its own currency, as the US, Brazil, Russia, China, and many others do, then it actually doesn't have to worry about its debt, in the sense that it can never be forced to default. The government can always issue new Treasury securities or dollars to pay its debts. The US could print trillions of dollars tomorrow and buy up all its outstanding debt. But this would actually be a terrible thing. There's nothing wrong with the government holding debt; in fact, it SHOULD hold debt, since only when the public sector runs a deficit can the private sector have a surplus. You and I, and every business or country besides the US government, needs to go out and "get" dollars; but since the US government is the sole ISSUER of dollars, it is in the opposite position; dollars are the one thing it can never run out of, and what it needs to go out and "get" are our labor and resources, not our dollars.
Imagine you run a household with 10 kids. You want those kids to do their chores, but you don't have anything to persuade them with. So you print up a bunch of "chore coupons" and promise to give one out for every hour that the kid works at chores (the number doesn't matter, it could be ten coupons, obviously you can just write or print as many as you want; we'll assume you are not constrained in the amount of paper or printer ink or whatever). The problem is, the kids don't want these chore coupons. Why would they? They can't use them for anything practical, and no one wants them so they can't trade them. So in order to get the kids to accept them in exchange for their hour of labor, you decide to institute a tax. At the end of every week, each kid must pay two coupons or he gets grounded. Suddenly the kids have an incentive to get the coupons from you, and we can imagine they all start off doing their two hours of chores to get exactly the coupons they need.
Perhaps one of your kids, Michael, is particularly industrious. He's a good planner, and he realizes that he can easily do ten hours of chores in a week and then have enough coupons to pay his tax for weeks without working. Sherri, on the other hand, is a terrible procrastinator and is always right up against the coupon deadline with no coupons. You could find something for her to do to earn another coupon, but you don't have any chores left and you have arbitrarily decided not to give out more than 24 coupons a week - which is just barely more than what all the kids need to pay the tax. Fortunately for her, she's a really good artist, and Michael, who has a few of those extra coupons, trades her one for a minecraft drawing that he likes. Now Sherri doesn't have to do chores because Michael is doing hers for her, but he gets something out of it; everyone's doing what they're good at and they can all pay the tax. We have the beginnings of a beautiful economy! We have dollars (chore coupons), we have a tax, and we have people trading goods and services so that everybody gets what they want.
Now, what gives the chore coupons value? Well, in this simple example, it becomes obvious: the tax. Without the tax, you can print as much currency as you like but no one will want it. With the tax, the coupons are "worth" not being grounded. You could also say they are worth an hour's worth of work, since that's the rate that you, the monopolist, set from the outset.
However, we are still missing one key component: government borrowing. Let's say you get generous with the coupons. You give out, not 24, but 100 coupons. Your kids have learned to value these coupons, so they work many more hours than they need to because they know they can always use extra coupons to pay a future week's tax, or to trade with one of their siblings for goods or services or juicy perks like riding shotgun. In fact, they get so fiscally responsible that they are all piling up quite a surplus of these coupons. Now you make a deal with them; you tell them that for 10 coupons, they can buy a gold coupon. Gold coupons are special, because you promise to pay interest on them; every week, the holder of a gold coupon gets one regular chore coupon. After ten weeks, they get their original 10 chore coupons back as well. If your kids have any brains at all, they will jump at the chance to grab these gold coupons. So they are now the holders of your "public debt"; you are going to owe them chore coupons down the road.
This analogy brings several things about our monetary operations into focus. First of all, you can plainly see that you can NEVER run out of chore coupons. You can always print as many as you want and give them out for whatever you want, and you can tax back as many as you want as well. You can also see that "borrowing" the chore coupons isn't strictly necessary at all. It will encourage your children to save, and it will reward them with free income for doing so. Maybe you see this as desirable - perhaps you want to reward Michael, who always does tons of chores way in advance, trades for others' coupons to have even more, and always has extra. However, you may ultimately get to a point where no one is doing chores at all - if Michael has twelve Gold coupons, he earns enough in interest every single week to pay for everybody else and still have some left over. Before long all the kids are just doing favors for Michael and nobody bothers doing your chores, and since Michael is still earning interest every week, you are constantly giving out more coupons than you are taking in in taxes. Now you are running a deficit, and Michael (and by extension everyone else in our little private economy) is running a surplus.
Can you ever "run out" of coupons in this situation? Is your ballooning "debt" a problem in and of itself? Will there every come a time when Michael is unwilling to buy gold coupons? No, of course not. In fact you DESIGNED it that way - you wanted Michael and the others to save, which means you HAD to pay them more coupons than you would eventually collect in taxes. In fact, if you took in MORE coupons at the end of each week than you are giving out, you are very quickly going to have some kids who are involuntarily grounded; they would have been happy to work to earn the tax coupons, but you refused to offer them any, so they remain unemployed. This is what would happen (and indeed has happened) in the US when we run a budget surplus; money begins to disappear from the economy and we quickly get into recession until our government has to good sense to start spending at a deficit again. The last two times we ran a sustained surplus in the US were in the 20's and 90's, and both periods saw a contraction of public debt, a corresponding expansion of private credit, and eventual depression and recession respectively, expressed most fully in the phenomenon of high unemployment.
Should you be paying Michael interest? A far more intriguing question - I would actually say no, but obviously that is going to be very unpopular with Michael and anyone else who has gotten used to their gold coupons paying free interest, so if you have started doing so it's going to be quite, quite politically unpopular to stop. But since you are the dictator of this microeconomy, you can pay out as many coupons as you want for anything your kids are willing to earn them for; you can tax them at any rate you want, and you can issue as many gold coupons you want paying whatever rate of interest you like. You have established a sovereign currency. If you want to get rid of the debt, it means buying up all the gold coupons out there. Michael probably won't be happy when you force him to give you back the gold coupons in exchange for regular coupons, but he has no choice. You can sell him more debt, or you can buy all of it back, it's up to you.
For countries that borrow in foreign currencies of course, this is not an option. If Haiti owes 100 billion in USD, it can't just print the money like the US government can, it has to borrow it, or tax it, or sell something in exchange for it. If it prints more of its own dollars, and uses them to try and buy up dollars (or some other limited resource like gold), it will only drive the price of its own currency down relative to the dollar or gold or whatever it's buying. This is what happened to the Weimar republic, but it cannot happen to the US or other "sovereign currency" nations.
Sorry this spiraled into a whole crazy Ted talk lol. But I think people get so used to seeing money from our perspective that it's hard to remember that governments have a completely different relationship to money and debt. They are tools of the public purpose, tools that the government uses to get things done, whether that's fighting a war, making investments in the economy, single-payer healthcare, or whatever. It's all just chores, coupons, and taxes.
@@tiberiusalexander6339 Your thought experiment is definitely interesting, however it is approximate at best to assert that the only factor driving a currency are taxes. This is a misunderstanding of the concept of money, and unfortunately MMTers seem uncapable of getting over this delusional dream of theirs
In this case, the government would make it easier for itself to pay off the debt. However, creditors do not like this and will be more hesistant to borrow out money to such a country.
Thank you for making me want to watch the rest of the video and not have to watch the rest of the video. Keep it up man!
Are people really homeowners if they're bound to mortgages they can be priced out so easily?
Nope. If you don't have the title or deed you aren't the owner. Even if you do have it you still only own property as long as you're paying tax on it
Though that's even more reason to not let the mortgages pop through falling home prices which force "owners" to sell the house they are living in or (given it's a variable interest loan or a loan with a shorter time period so one has to get a new one) are forced to sell due to inability to pay back that said loan.
Watching this 10 months later and wow
Sacrificing the government doesn’t sound like a bad idea.
Not like they're doing anything useful anyway. They're actively abdicating on their one legitimate duty: punishing violent crime and fraud.