i fully support the usa defaulting on its debt. if its broken and you keep on putting glue/tape on it sooner or later it will break breaking it sooner than later is better.
Why do you believe a government that makes it's own money can go broke in the currency it makes? Also why do you still believe our taxes pay for government operations when Covid proved we don't tax or issue bonds to spend. If we want to spend money we do and don't raise taxes or sell bonds to do it.
US National debt is nothing but an accounting record of all the dollars the US Federal govt has spent since inception, which is has yet to tax back and sits in our economy as our savings. It is not debt at all, its part of our money supply and there is no problem with it other than the distribution of those dollars. Its not something our grandchildren will have to pay back. Its not a burden on our children. The Fed govt can make any amount of payments it wants to and does not spend peoples taxes. The difference between spending and taxes is the deficit, which necessarily equals our SAVINGS.
We're borrowing against our children's futures in more ways than just our national debt. We're building unsustainable infrastructure systems that they won't be able to afford to maintain, and we're polluting the environment for them to either pay to clean up or live with the health consequences of.
Italian here. We, too, had a period - 1980s - where our debt exploded until the markets were worried we would default. We didn't default - that's good. Our economy remained stagnant for decades, because taxes couldn't be lowered while our government could hardly afford any kind of stimulus - that's bad. Also, we are vulnerable more than ever to pressure from financial markets. And the chances of going back to a manageable debt are close to zero, which means lifelong state slavery to debt owners. So, no, you don't want to be in our situation even if "we are still not going to default". Just saying.....
Amerikkka is spoiled...hence it's printing press goes nonstop cos the is enslaved by the $ cos world runs on it atleast and indefinitely will see till other credible baskets come to bear
"Taxes couldn't be lowered" yet they were lowered, for the most wealthy People and thé biggest international compagnies how evade happily Taxes. Richard is blinded by the economic doxa. A sovereign state is not à compagny. A state could decide to tax 20% of any wealth above a certain threshold. It has been done in the past (France, 1946-1949). Abstate could also tax at an exorbitant rate above a certain pay grade : USA under eisenhower had a 97% marginal tax rate.
It never ceases to baffle me that approving borrowing is a separate process from approving the budget. The budget has implied borrowing in it, why would any sensible system not also authorize the government to borrow as specified in the budget?
It’s simply so they can have this fight every year. Just like china’s most favored nation status back in the 2000s. It’s non debatable but it was brought up to debate regardless.
Because automatically writing yourself a blank check is not actually responsible. The whole point is to place a constraint where the people spending the money have to actually explain why it has to be borrowed rather than the country working off existing tax revenue.
@@defenstrator4660 so its simple, any time we have to pass a bill that increases government spending, pass a debt ceiling increase to compensate. you are already showing where the money is going, its going to this new spending venture.
@@ShadowAraun Yeah, that’s missing the point. The reason the debt ceiling is there is to try and stop spending money you don’t have. Unless it is some sort of future benefit borrowing is simply stealing the money of those in the future to spend in the present. You get the stuff, they get the debt. The idea is that if you should not be able to simply borrow and tax. That there must be some fiscal responsibility to live within your means. It can be done. During the 90s both Canada and the US had balanced budgets. So why people treat it as an alien concept is beyond me,
@@defenstrator4660 the idea of raising the ceiling being tied to bills that increase spending is EXACTLY to limit the bills that increase spending. so we can stop spending money we don't have.
Well, it's nice to know that most investors and banks aren't skeptical of the US's ability to pay it back, yet. Edit: But still, maybe congress will do more damage than the size of the debt itself.
US doesn't let "choices" to emerge or stay. Because it will crumble their establishment. More importantly its allies helps US to do that for easy US-Pound & US-Euro swap.
what choice do they actually have? the reality is that nobody believes the US is paying back anything, but they have to act like it. otherwise their companies will collapse along with the US and the dollar
There is technically no debt crisis if the debt is dollar denominated, as the country can always print money. The real risk is foreign countries' loss of confidence in US dollar. This depends mostly on how fair and well we treat the other countries and whether they believe that we are a "stable partner" of trade. This latter part I am not so sure with what we have been hysterically doing in the past few years.
No. Thats not true. Everytime you print money, the value backing it gets divided by the increased amount of printed dollars. If your gdp does not increase to compensate for the increase of debt or printed dollars, your purchasing power goes down. Hence inflation. This idea that you can do this with no consequence is blatantly false.
@@LuciferArc1 you contradicted your own point. First you said the value backing dollars is divided every time you print money, then you said that is only the case if the gdp does not increase. Which is it? does it devalue every time you print, or only when theres no growth?
Have seen lots of inspiring testimonies about this broker lately...I guess she must be really good…l'll definitely make out time to connect with her anyways
@@kicapanmanis1060 increasing the dept ceiling will only cause more dept, the more dept the more the U.S. dollar will lose value. No value, everything will come to a stand still and everything will probably crash. They’re only causing more economic damage by not paying the dept.
0:06: 📉 The US government is at its debt ceiling and may default on its debt, causing severe consequences for the economy. 3:43: 📊 The US government has been accumulating federal debt since 2001, with an average annual inflation-adjusted pace of 5.7 percent, leading to the need for frequent debt ceiling hikes. 6:41: 💰 The United States has a larger economy and more industry diversification, giving it more access to capital and lower reliance on crucial imports compared to other countries. 9:31: 📈 Despite a massive debt load, the US government has been able to borrow at low rates, suggesting market confidence in America's solvency. 12:34: 💰 The government should prioritize managing the debt balance before interest payments to avoid a debt crisis, as seen in Greece and Sri Lanka. Recap by Tammy AI
@@Vladimir_Gluten Mis-management, bad policies, horrible future-proofing, loss of jobs... The list is so insanely long. In total, the biggest factor here is excessive spending. The biggest contributor to that is the loss of jobs in the American market. We don't make almost anything anymore. This means the U.S. literally cannot sell more than we buy in goods from other countries. Instead of fixing this horrendous mess, however, we just keep printing money. This kinda, sorta, barely works to prevent the U.S. from going bankrupt but also means that the U.S. citizens and other countries that trade in USD are being affected by the inflation that this causes. (AKA, this is the part of the equation that makes it so nobody can afford groceries.) This "strategy" means we aren't paying the debt, just pushing it off at the cost of destroying the actual value of our currency. In other words, if a handful of countries decided that they wanted all their money today and not for us to pay it off like a loan, the U.S. and all that live inside it, would now be subject to who knows what because there is zero historical precedence for a super power with this much debt collapsing, and collapsing with as much weight as the U.S. currently carries. *Starts sweating profusely* I'm not freaking out, you're freaking out! All jokes aside, it's a real mess and nobody agrees on why it's happening. This is a combination of what I've heard and some small personal insights from my collage economics class. Maybe this is helpful to you.
"What happens to those nations that run out of cash either one goes commie or ones goes fash. Million dollars for a loaf of bread can't wait to bash my neighbors head print money. " Remember this song?
I find it unnerving that Warren, Sanders, and AOC claim that having a reserve currency means we can spend infinitely without consequences, _and people believe them._
@@badluck5647 Hey hey hey, not every politician has the time to read history okay? Pandering to political extremism is very time consuming I’ll have you know!
@@NormalPerson053 Not necessarily, the UK lost its reserve status and have managed fine (until it decided to shoot itself in the foot). But yeah that’s a gamble best left not taken…
"Who is going to pay for all these government bailouts? That's out children, our poor, poor children." - The Onion, 2009 (pundit ratings plummeted in the first half, skyrocketed in the second)
A lot of billionaires and millionaires are being made everyday but none are contributing to the debt ceiling. Imagine being a millionaire but your country’s debt is in 31T 😂 fake rich i may say
One small, but important correction, @9:00: Instead of "Even with a massive debt load, the cost of maintaining this debt is actually lower than it's been in the past", it should be "...is actually *relatively* lower than...", right?
But what are the consequences? Economists do not agree on when the tipping point is or if there even is one. The US has sovereign currency that isn’t beholden to the price of a good (ie a Fiat currency) or another government (Euro). Running a surplus takes money out of the economy through taxation. Government spending stimulates economic activity, either by adding to the capital stock (roads etc), wages (government employees) or direct transfers (tax credits, assistance programs, social security, etc). Running a deficit ensures that more money is distributed. Inflation can be controlled by both interest rates and through taxation. Your retirement plan, social security administration, banks, and long term investors use bonds as an investment tool. If the government didn’t issue treasury bonds then you wouldn’t have access to a long term and safe investment. You’d be reliant on real estate, stock prices, or business investment as your only means of investment.
As they should. The debt ceiling is about paying debts that have already been incurred, mostly through obligations that have already been approved by Congress. Reducing government spending during economic expansion is a budget conversation.
@@grimaffiliations3671 There is technically always a debt crisis with fiat currencies as every single printed dollar has interest on it and it is basically a loan of dollar + interest. Problem is at the point of taking the loan/printing currency, funds for that interest do not exist so we could never pay our loan back completely. This is why deficit spending is crucial.
@@anton3437 every printed dollar doesn't have interest, the fed just sells bonds equivalent to the difference between spending and taxes, and those bonds are the ones with interest. But the fed only does that to control interest rates, they could deficit spend without selling bonds if they wanted to
just a reminder that neither party cares absolutely nothing about debt when they are in charge. so, it will rise. will that ever matter to the one who has the biggest GDP and biggest military? probably not. but then again, they are being awfully sweaty about china and encircling them for really no good reason.
@@Redmanticore I agree, my point is one party lies and says tells their voters a story which sadly many of their voters believe. There's a reason fox lies and misinforms their viewers.
Perhaps not such a bad thing. Two possible outcomes: you convince others you are successful and can make the payments (thus they are invested in your continued success) or they are unconvinced and seize your assets. Good luck. Or thirdly, debt forgiveness though that is somewhat in category 1 of convincing debt holders but now we're approaching levels of nuance involving debt and politics that I can neither articulate nor understand properly to succinctly write in a comment.
I'm not gonna lie. I was expecting the usual "sound the alarm we are all gonna die", but I was pleasantly surprised to see the opposite. Thank you for your work
We are in big trouble. The debt service cost is exploding. It will be $700 billion by early 2024. That is close to what the federal govt spends on the military.
I can't remember the book at the top of my head but read a book that studied debt and defaults of countries across history and found very little correlation between debt-to-GDP ratio and defaults. Which itself doesn't mean more debt = good but a country having high debt to its GDP doesn't mean it will more likely default on them. How the debt is managed and serviced is more important than the actual amount of debt.
Yeah, russia had a low debt to gdp ratio in the late 90's and still defaulted, meanwhile japans' debt is twice the size of it's entire economy and it's fine. What determines whether or not you default is whether or not your debt is in your own currency. If it is, you're fine
@@grimaffiliations3671 yeah, but the problem is, you become reliant upon said situation and if and when that changes you are now saddled with a mountain of debt. The US is lucky right now that the world at large is favorable towards us and sees us as a good trading partner. But that can very easily change, especially with China looking at large.
@@howardbaxter2514 But the nature of sovereign debt means you can conduct fiscal policy however you see fit regardless of any changes in trading patterns. Because a nation that borrows in it's own currency does not need domestic of foreign investors in order to spend or control their interest rates. The world could stop being favorable to the US, and it could lose it's reserve currency status and it would still be able to operate the same way. After all, plenty of non reserve currency nations operate this way today
The US wouldn’t be affected on current debt/bonds. That’s the problem for the debt holder….suckers!!!😂😂 But it would affect future US borrowing…😢 Btw, US also a holder of current US debt.
@@howardbaxter2514 It can change, but not very easily. It would be very hard for anyone to replicate US value to the world, as you have to be actually physically capable of doing so, and no one is close yet. US military, specifically Navy plays a large role in this and its not likely to change to near future.
Would this be a bad time to point out that if Bush Jr had just continued Clinton's budget policies, the US national debt would be completely paid off by this point? It seems like a bad time.
You wouldn't want the US to be entirely debt-free though, as that would also dry up the government's credit. Budget surpluses (which are problematic in their own way, but that's a different conversation) would have created an incentive to offer more Treasury bonds.
the sole reason why US can sustain such a high debt is simply because of reserve currency status. However, with more countries breaking away from the dollars for their trade and reserves, that will be less demands for dollars which will slowly degrade the reserve status. While many countries would not want to immediately crash the dollars since it will also put them in a bind. So what many countries are doing now is mainly to remove the dollar risk and weaponized against them while at the same time they slowly unload dollar bonds so as not to shock the system too much.
@@EdMan102292 That's one fact that endlessly pisses me off about people who complain about things like US healthcare and welfare. We already spend 1/3 of our budget on social security and unemployment and around 1/4 on healthcare. The military spending is higher than most countries at around 15% but that's in large part due to the fact that the rest of the world depends on the US for security. As the war in Ukraine has proven Europe hasn't been spending their fair share and relied on America to pick up their tab for the last couple decades and that's just one area the US safeguards. Even then the US military spending isnt high enough to solve all or even most of our problems; most experts say a country should spend around 2% of their GDP on defense and the US spends a little over 3% so even if they got it down to that 2% level it would only free up around 5% of the budget. That isnt a silver bullet either, most military spending goes right back into the economy in the form of infrastructure, R&D, and public works and further gets some of the costs recouped by selling equipment to other countries. The US also sends a lot of aid in the form of "military equipment", even humanitarian aid is taken out of that military spending since things like food aid is often in the form of MREs and the US military conducts things like rescue operations and disaster relief (just look at the disaster in Haiti).
nothing is causing problems. The US debt is perfectly sustainable, because the fed has ironclad control of our interest rates. They will always make sure inters payments are below the growth of the economy
@@grimaffiliations3671 That isn't always going to be enough to avoid issues. If that was the case the government would have gotten rid of the debt ceiling permanently long ago.
The problem with continuing to raise the debt ceiling is that one day they are going to go up and ask for so much that they are going to make an argentine, in other words, from one day to the next all confidence in the US public debt is lost and creditors are not going to lend (default)
I mean only if dept as a percentage of GDP is increasing. If the debt is increasing more slowly than the economy is growing then we could hit debt ceilings while literally owing less and less debt.
Silly me expecting this guy to explain why US overprinting more than their GDP every year is good, but all other countries doing the same is catastrophic...
Is the US borrowing from the Iron Bank from Braavos? I remember in GOT that Tywin said the crown has borrowed so much, he wouldn't even give a specific amount.
One could argue that the only reason Japan has not defaulted is because of their US debt collateral. Therefore, if the US debt comes into question, Japan will certainly default.
The reality is that the Congress could vote to remove the debt ceiling completely like many other counties have done. In doing that, they would also have to agree to let go of that as a bargaining chip. If it’s gone, no one can use it as ammunition or hostage taking. That is more the issue. Getting them to agree to loss of control they feel from having a debt ceiling.
If you notice the chart at 1:52, our debt remained very stable at around $3 trillion from the period after WWII until 1982. During this period, we taxed corporations and the wealthy at a very high rate with significant deductions and loopholes for investing back into our economy. Our middle class was at its peak at around 65% of the population, we had labor unions, the stock market rallied, we fought a war in Korea and Vietnam, and put mankind on the moon. Beginning with Reaganomics around 1982, we offered large tax cuts to corporations and the wealthy, and our debt grew almost every year since. Since then, our middle class shrank, wages no longer kept pace with productivity (stagnated), our mother's entered the workforce to keep up, our savings went negative, and our personal consumer debt grew (in part funding China's growth). At the same time our production went abroad, and the wealth gap has increased. The majority of our national debt today is owned by Americans with only $6 trillion owed to other countries, including a little over $1 trillion each to China and Japan. Much of our debt is in private and public retirement accounts, social security and Medicare, state and local governments, and our financial system to include the Federal Reserve and support for the dollar as a global reserve currency. Our debt is a measure of our economic wealth and power.
Bottom up works and top down doesn’t? It’s almost like literally everyone knows this but everyone that can make changes are benefiting from the current system so they refuse to make any changes.
@@rttrttyan I believe you're right about people benefitting from top down lobbying and campaign contributions. In my view, it's not so much top down doesn't work. It does. Milton Freidman's "greed is good" laisses faire (Reagan) economics simply goes to where the returns are as a matter of self interest. People keep more of their money to spend it as they see fit. Like big tech rather than rural brick and mortar rural small businesses - once the backbone of the US economy and our consuming middle class nuclear family. The government spends bottom up where financial returns do not matter as much. Infrastructure, for example, is less about financial return to the government and more about returns in economic growth, the public good, and creating jobs. We avoided the near certain recession (I think the inverted yield curve was more about lower inflation expectations than a recession indicator). I argue the Obama's "supply side" recovery from the 2008 financial crisis was (politically) sluggish (for a 1 term president) because returns were found in emerging markets abroad and fracking in the US - generally speaking. Both benefitted from a zero interest rate policy. The post lockdown recovery was more rapid because US consumers had stimulus money to support opening of shuttered US businesses.
@@rttrttyan I'm sorry for not being clear. I was paraphrasing Mitch McConnell who promised to make Obama, "a 1 term president." I think this was part of the motivation for not providing sufficient stimulus to main street in order to ruin his presidency. Meanwhile a lot of people were out of work, lost their homes, and could not retire. This actually began the populist movements in America, including the Occupy Wall Street, Tea Party, and MAGA. It took nearly 5 years for unemployment to come down to around 5% when the Fed began to tighten the money supply in 2013. By the time Trump took office the unemployment rate had fallen to around 4.5%. Trump and his supporters were so proud of "his" economy. In fact, it was primarily driven, and necessarily overblown (quantitative easing), by the Fed during Obama's term just to get inflation grudgingly up to 2%. This was painful trickle down economics in action.
Don't forget about the insane amounts of debts that the decades long war on terror brought us. Before that we had almost no debt. I know there are many factors but that's a huge one.
I wish I knew which topics were inherently politicized when I was younger. Maybe some good professors mentioned it but I always got the average to below avg profs due to registering late. Took me until being an adult a few years before I noticed this happens every year like american idol.
@@grimaffiliations3671 see, I’m calling absolute bullshit on that. It will be an issue in the future if we don’t take steps to mitigate it. You say the US will be fine, but what happens when our allies and the world decides to not invest in us? What happens when the international laws we hold dearly break down, and the debt collectors of other foreign entities come calling? Such a notion baffles me, especially when history tells us otherwise. We are likely one series of unfortunate events from all of this going out the window.
@@howardbaxter2514 We'll be fine when the world decides not to invest in us, because foreign investment does not determine our ability to conduct fiscal policy as we see fit. That's the beauty of sovereign debt, you cannot default on debt denominated in your own currency
@@grimaffiliations3671 the debt to GDP increased from 30% to 120% in the last 40 years. Debt servicing will soon be the biggest subject of government spending, above social security, and military. This isn't a sustainable path
@@mephistoss238 It is sustainable, debt to gdp ratio is not what determines your vulnerability to default. Russia's debt to gdp ratio was low when they defaulted in the late 90's, meanwhile Japan's debt has gone up as high as 250% and yet they've never come close to default. Whats the difference? One had sovereign debt, and the other had debt denominated in foreign currencies. That is the key to assessing your potential for default, how much of your debt is in someone else's currency. If anything is unsustainable, it's a balanced budget. Because the private sector relies on government deficits to stay afloat. If the government balances its budget, it would be pushing the deficit onto the private sector, thus causing a recession. Every recession in US history has occurred after a period of deficit reduction
Absolutely - when Argentina defaulted 20 years ago it had little impact on the world economy. But if America defaulted the impact could have a domino effect on other highly indebted countries (Japan, Italy, Spain, Greece) and so maybe the Euro Zone could also become contaminated??
Every single person can think of at least one thing which they think the government shouldn't be spending money on. And yet, the spending goes on and on.
Something I really want to look into and break down, is how much of the spending is actual, unadulterated waste. Depending on how substantial said waste/corruption spending is, we may not have to cut back from our big time programs as much as we initially expect. Remember, little things add up quickly, and it is those little things that are likely hurting us the most.
@@howardbaxter2514 Exactly. Problem being that politicians get better jobs once they stop being politicians, if they expand the amount of waste. And guess who's regulating the regulators.
Or they could maybe start holding some of these government agencies accountable for having taxpayer dollars just disappear. The DoD hasn’t passed an IRS audit is 20 years and there is something like 3.1 trillion dollars that they just have no idea where it went. That is 3.1 trillion taxpayer dollars just disappearing into thin air that could be used to stimulate the economy or pay off debt. The DoD is also only one agency, there are plenty more with probably just as high amounts and money like that stacks up FAST.
Corporate taxes 9% vs Individual Income taxes 54%. Can you guess what happened around the 80s when debt started to climb? The loopholes made things worse over the years.
The simple point is this: the debt to gdp ration is rising. The US cannot forever just keep printing more money - no really that strategy only works while you have new markets to exploit and you can hold on to your existing markets. When other nations industrialise, break free from your control, seek deals with other major nations and when other nations figure out a mechanism of payment that doesn't require your national currency - at that point the cracks in the dam you are noticing now will spread at a lightening pace. When? Highly unlikely this decade. Best GUESS - mid to late next decade.
An important thing to also remember: for USA to remain the main global reserve currency, everyone needs access to USD...which means, on average, there must be more dollars flowing out of the country than in the country. This incredible economic power comes with a terrible cost of being mathematically unsustainable by its very nature. I'm not too worried yet...but there is NO sign of spending decrease on the horizon on anything from war to debt forgiveness---it's all like cost has no meaning here
@@grimaffiliations3671 except such a burden gets put on the average American through stuff like inflation. What happens when there is an internal revolt within our own country? Investors will begin to bail, and we will be saddled with the debt. You have to have a major hubris to overlook these issues. I understand the issue isn’t as dire as it seems, but to brush it off as a nonissue is beyond foolishness.
Im kinda confused as to what it means for government to be a holder of its own debt. Is it equivalent of me having creditcard debt but instead of owing that money to the bank, i owe it to myself? If that's the case, in what sense is that really debt then?
I’m not an economist but someone in another comment here kinda answered you. They said the problem is not the debt at all befause we own the currency. The problem is other countries’ belief in our currency. If we push our privilege too far and another world currency is established, we’re screwed.
Maybe it's just because I'm young, but this all seems NEEDLESSLY complicated. Too many variables and stats to something that's too simple. Thinking about it as a common citizen, if I don't repay my debts, people come 'A-knockin'. Assets get repossessed, wages garnished, etc. When citizens don't pay the fed, it's a problem. But when the government don't pay.. ?? Why is there little to no reparcussions for governments? They mismanage their money but the people of that country are penalized for it?
There's an advert on this video which is offering a scheme exactly like those you have warned us of in the past. "You may doubt my strategy.. so lets take this one individual case where it's been successful as an example"......
We whistle past the graveyard of our Social Security outlays. Funny how even high schoolers were talking about that 20 years ago and now it's the third rail of discussion. I sure would like to see a contraction in our military spending, at least. But naw. No can do.
@@JeredtheShy Military spending is totally in-line with other country's military spending. Sure, we spend a bit more, but not by any significant margin. The fact that the general american public holds the vast amount of our national debt means that the situation is not nearly as dire as other countries. Hence why the bond prices are stable despite the increase in debt load.
so what? The US getting to a point it won't be able to service its debt, meaning millions that were counting on that money from the government to finance their retirement will have to make do without it.
US debt is a strange thing and acts so different from other countries because it's the world reserve currency and has so much pull in the world geopolitical and economically and no one can really hurt it
For now. There are a lot of countries that want to see this change. Checkout BRICS (Brazil, Russia, India, China and South Africa) who are a real threat to US dollar continuing long-term as the world reserve currecy.
Each year the US influence over the world becomes more and more oversized in comparison to its size. Each year the US is getting more belligerent. I can't see the world allowing this to go on in years to come.
There is nothing strange about it. The only difference between the US and countries like Argentina or Greece is simply that the US credit limit is much higher. But there is a credit limit make no mistake about it
Well yea that's the reason. Economy is built on trust (obvious yea but something people really underestimate). It's the same reason the pound is so powerful. People like it and trust it, so it is.
I think it's a bubble, it's clearly shown by the unexplainable investor confidence. The debt to GDP will keep growing, US will start to print more money to support GDP during crises. As the USD becomes less of a reserve currency worldwide and interest rates decrease, investors will slowly opt away leaving the US government in need for money which will make them print more and more leading to a total collapse of the currency. This will take 5-15 years to play out!
@@Policyparagon We are going to default eventually through not paying, or inflation, better to do it honestly and get it over with. We need massive cuts to government
For the love of all things, they should never allow a default to ever happen under any circumstances ever! That would be very very very very very very very absolutely horrifically bad.
I mean we all know they will just raise it. We go through this every time. Media makes us scared and they just raise it and they make it look like they saved the day
@@FictionHubZA They can stop adding to the debt whenever they want, selling bonds are not necessary to finance government spending. But they don't want to get rid of the treasury market. The national debt could just as easily be called the national savings account
The problem with the US government's attitude to debt isn't that a crisis or collapse or default is looming, it's that they have come to rely on being protected by transient features of the economy. * We can keep borrowing more because GDP goes up (until it doesn't) * The dollar being the world's reserve currency depresses inflation (The pound used to have this position, look at the UK now) * The markets don't see a problem yet (but once they do, the spiral will have started and it will be too late to prepare) These are bad habits that need to be addressed before, not after things start going badly.
The fed has ironclad control of our interest rates, so they will always make sure interest payments fall below the growth of our economy. I wouldn't say our reserve currency status has any bearing on inflation. What do you mean look at the UK now? You make it seem like they defaulted and are currently dealing with hyper inflation. They're fine
Great video! Would you be interested in doing a video on the “petrodollar” phenomenon? It’s hard for me to differentiate between propaganda and facts regarding this issue…
The average maturity of the debt is about 5 years so current interest payments still mostly reflect the previous super low rates. Right now expiring debt is being refinanced at 4-5% interest rate, if current rates stay for a few years interest on just the current debt will be around 1.5 Trillion. About Twice what is being spent on defense ! The U.S was running a Trillion dollar deficit during "the good times" before COVID when it should have been paying down the debt. Now it is at 1.5 Trillion, recession is knocking on the door and there is nothing left to fight it with.
The US debt situation is quite alarming, with the federal government reaching its debt ceiling of 31.46 trillion US dollars. While the government has been using extraordinary measures to prevent a total shutdown, if the situation is not resolved by July to September, the US could default on its debt, which would be catastrophic for the economy. The political discourse seems to be causing the issue rather than fiscal demise, as the debt ceiling can be hiked at any time. However, the fact that the government keeps needing to push this debt ceiling higher and higher is a real problem. The US is far from a Greece or Sri Lanka-like outcome, even with a massive debt pile. The funding for government costs comes primarily from taxes, with the single largest source being individual income tax. Whenever the government spends more than it earns in a given year, it needs to borrow the difference through the issuance or sale of Treasury bonds. Total debt isn't a good gauge of a country's solvency, as the size of a country matters, too, which is why economists often look more toward a country's debt to GDP when gauging a country's debt burden. Unfortunately, this measure isn't doing well either, with the US at 124, which is the highest level it's been since the end of the Second World War. While the US has seen a jump in debt every time it experienced a severe economic shock, it's crucial to note that a growing debt balance may not be all that concerning if a country's size is keeping pace regarding its economic output. The US debt situation is concerning. The US has been spending more than it earns every year since 2001, and this trend isn't sustainable. While the debt ceiling can be hiked at any time, political discourse seems to be causing the issue, which is a significant concern. It's crucial to note that the US is still far from a Greece or Sri Lanka-like outcome, even with a massive debt pile. However, the US's debt to GDP measure is currently the highest level it's been since the end of the Second World War, which is alarming. It's essential to monitor this situation closely as a country's size matters too, and the US's economic output must keep pace with its growing debt balance.
Thank you so much for this information. I’ve been asking people for mathematical proof that this particular moment calls for the US to default on the national debt, not that the number is shocking to their senses, but proof that a default is necessary, and I have yet to see one of the people advocating for a default provide one. Politics is the reason why we’re in danger of a default at this moment.
@@asdf3568 Most Presidents Promise to Pay the Debt, including Donald Trump who managed to increase it more than any Pres in History. Biden also touted himself as being 'Fiscally Responsible', and he's printed more money than any Pres in History. They ALL Promise to Pay it Down. None do.
Debt collectors come calling when you fail to make your payments. It's up to the underwriters to decide whether to loan to you in the first place. Anyway, at this point, I'd still trust the federal government to pay its debt more than I would trust any corporation or even state government.
The same is true for Italy, which still has low rates locked in for a while. However if central banks don’t address inflation asap and let it run higher for longer, government will need to roll over more and more of their debt with higher rates and at that time the higher yields are really gonna bite federal budgets. Even if governments would suddenly become fiscally responsible and not grow debt/GDP further, central banks still need to figure out inflation soon. A lot is riding on them. And yes that may involve inflicting more pain with higher rates in the short-term.
high inflation (and, by proxy, higher interest rates) is bad only for those countries with deficit excluded debt interests. Let me explain. Italy, for example, without debt interests, would have no deficit, but a surplus. So an inflation spike to 10%, will reduce the past debt by 10% each year. Of course, if a country instead has a big deficit, even wituout considering debt interests, then the situation is more alarming, since higher interest rates means that new debt will be very costly
Germany solved this sort of by making it illegal for cities and communities to take on debt. Then making it illegal for union states to take on debt. And then later the country cannot take on debt without a majority. Although in the USA it doesn't mean much when there's always one party with a complete majority, who doesn't have to form coalitions and make contracts with other parties to ensure their rule.
I will explain it for every one? This government makes debt, with no plans on paying back one cent of it. No balanced budget, and no repayment plan either,
Two big problems you did not talk about. 1. Japan and China are selling their us bonds. 2. The trillion dollar tax cut to the rich means less income to pay the bills.
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we don't have a debt problem. Debt only becomes a problem if you lose control of your interest rates, and that can't happen to a nation with all it''s debt in it's own currency
Pretty easy explanation: politicians dont care about anything past the next election, most of them wont be alive or in office to see most of the effects of their actions, and one of the few things uniting both parties is their desire to spend money like a teenager who just won the lottery. Sadly our choices for each presidential election are "do we elected a Republican and see them lose us tax revenue effectivley 'spending' money on corproations or do we elect a Democrat who will throw mountains of cash at different corporations and raise taxes?"
@@arthas640 Democrats don't throw money on corporations, they throw money on things that help every day Americans like medicaid expansion, medicare negotiated drug prices, child tax credits, paid family leave that sort of thing
@@grimaffiliations3671 They overpay for medications the same as the insurance companies, much the same happens with things like a lot of the money that went towards COVID. The infrastructure program isn't much different, most of the money goes towards government contracts which are carried out via a public bid structure. They decide what kind of work they want done then accept bids from companies on those projects. This is normally competitive model used in the private sector as well but with government projects they're bloated and inefficient, often by design. For example they require a minimum wage to be paid based off the job, which sounds nice but it's often higher than the going rate for that job. Where I live for example they require you to pay 25-50% above the going rate which is already fairly high for many jobs. They also require you to often use specific materials from specific suppliers like only using GE electrical materials and they often over pay for them. I worked on a school remodel where they spent $1200 per light fixture from a single company who charged that much because they were the only one you could buy it from and there were identical lights selling for around $150 at the time and it was the same for some electronics in class rooms where they spent over $1000 for a normal HDMI cable you could find at Best Buy for under $100. They also will often call it an "open bid" but set up qualifiers that make it difficult or impossible to get much competition so they can give contracts to contractors they prefer at inflated rates (for example where I live construction unions based in the big cities are some of the largest campaign donors and big city projects are often earmarked for unions who dont do much work outside the big cities). They dont even always pay that great with those set wges since there are often loopholes that only a few companies can exploit that allow them to pay below that amount (for example big businesses can get a certification that allows them to pay apprentices a fraction of that set wage, barely above the states minimum wage but it's so expensive to get certified few companies can afford to do it and carry out enough government contracting to make it worthwhile and union companies automatically qualify for the loop hole). Part of that infrastructure program as well as the COMPETE act also involve the government giving out tens of billions to private companies for R&D. I dont have much insight into that though since that's not the kind of government contracting I've done personally but they're mainly fortune 500 companies that you'd expect to have their own lobbyists. I vote democrat since they're the best alternative (Trump and his ilk are many hings but "less corrupt" isnt one of them) but look into campaign donors to the party and much like the GOP you'll find a laundry list of government contractors, companies that regularly get bailouts and grants, and the hyper wealthy. Biden for example got most of his money from Wall Street types in the financial industry, the same kind of people that caused the crash in 2008 and got massive bailouts that often ended up lining the pockets of the executives, the same companies who benefited from deregulation like Clinton repealing the Glass Steagal act or deregulation done by Bush and Reagan before and after Clinton.
Something important to keep in mind is debt is a ratio of spending to earnings. Many forget about the earnings part. If you have a company thats in debt, and your employees tell you they cant afford to ship a product to a customer, your response should be that you cant afford not to. Likewise if the american people are told we cant afford to have a properly functioning IRS, our response should be we cant afford not to. There are very few things that are negotiable on the spending side. Defense spending is off the table, medicare is off the table, etc etc. Only a tiny fraction of our spending is on the table, and it isnt enough to make a marked difference (thats not to say nothing should be done, only that it wont make enough of a difference to fget back in the green). However on the earnings side we could make a huge difference with minor changes. Start by closing some loopholes and having a more equitable tax system and the debt crisis solves itself. The debt crisis is first and foremost a product of taxes being unpopular with voters, however the tax system still has some common sense fixes everyone can agree on.
Social Security, Medicaid/Medicare, general welfare, and Defense spending can all be put on the table. If they would even just pause the increases in spending, we could have a budget surplus within a few years.
Strongly disagree. There are always areas where spending can be cut. We may say the entire defense budget is good, but when you look into it you will notice a plethora of waste. Same goes for other massive expenditures.
@@howardbaxter2514 im not trying to take a stance over whether or not it should be on the table, only that it would be political suicide so they wont do it, and even if they did we still would be in the red. My main point is that income matters much more than spending. As a side note, I actually work in defense and Id agree theres plenty of bloat. The problem is the same problem with most government programs, the incentives for government funded contractors and organizations are to spend money not save money (use it or lose it). If we could reevaluate the incentive structure then maybe we could do something about a lot of government spending - maybe not lower it but at least get a lot more value out of every tax dollar spent. We should be rewarded for saving money, not punished for it (by next years funding being lowered if we dont spend everything they gave us this year).
When the Pentagon says it doesn't know where trillions of dollars went every decade. It would seem that they are responsible for the budget not being balanced. Also responsible for all of the national debt.
Something I think you should have gone over is Japan. Japans debt to GDP ratio is over 200% and they have never had a meltdown, but they have had a significant stagnation in economic growth. It’s a much better example of what could happen to the U.S. if the debt is not kept under control. Shri Lanka and Greece really aren’t good corollaries due the nature of their economies.
My dear. You forgot to mention that the US are projecting to add another 52 trillion dollars in the next 10 years(2033) and that will be a total of 83.4 trillion dollars and you can tell me how a gigantic 83.4 trillion dollars will be sustainable.The United States can keep bragging about having the strongest economy in the world;but if that debt reach closer to 100 trillion by the next decade,with inflation that will keep going up, we will probably start to see countries like Japan,China and UK starting to get rid of those US treasuries bonds to defend their own currencies. We already seen it this time when the dollar when too high and crushed other currencies. Japan and China had to sell some of those bonds to defend their own currencies.In the next decade, if inflation skyrocket and the US debt becomes unsustainable,(83 trillion in the next decade) countries will start to look for alternatives to the dollar like cryptocurrencies and Gold.If those countries start to get rid of the dollar and sell those treasuries bonds, the United States economy will be in big troubles. Let’s start to pay close attention to these 2 things:INFLATION and US DEBT. Those are the 2 things that can bring the us economy on its knees in the next decades
I love your videos, and this one is also very good in general, but I wish you had talked about the fact the Fed can always reduce the outstanding debt load by purchasing as much of the debt as is needed. Since all interest payments the Fed receives are returned to the Treasury, this is effectively the same as retiring that portion of the debt. The trade off being that Fed purchases of treasuries will (all things equal) lower the interest rate, which may conflict with their stated goals… but it doesn’t change the fact that the US debt, in itself, is never an inescapable burden. Although it’s less accepted, it would also have been good to see you mention that many economists reject the idea that treasuries represent the government borrowing money in the first place, but are simply functioning to reduce the liquid hard money supply (as evidenced by the justification for war bonds in the past).
My concern in Canada is that not only is the government debt to GDP going up, household debt to GDP is also going up. It's usually better for the society as a whole if those two indicators are balancing against each other
Come on!! Many wealthy corporations (Amazon, GE, Exxon, etc.) don’t pay a dime in taxes and need to pay their fair share. When I make over 160,000 I no longer have to pay anymore into Social Security so raise that to 200,000 and I’ll start paying more. Being a text accountant I know the system is rigged against the middle and low income workers. The loopholes need to need to be closed. I should not be paying less taxes than my secretary. The greed never ends!
Similar for Canada, but we will have to take on more federal debt to bail out our housing market, corporate sector, and possibly (Hopefully not) our financial system because of our private debt bubble
What need be said here is 80% of the Federal Government’s operational budget is actually dedicated to the salaries, perks, lifelong pensions and medical and benefits, of federal government employees. We’re paying through the nose to support an immense horde of public “self” servants who can retire at 50, never have to worry about a pink slip, and who, after 1 year of “service” get tenure (meaning they cannot be fired). This public servant more often than not goes “ROAD” at that stage (Retired On Active Duty). What we’re seeing is the greatest transfer of wealth in history from the productive non-government working class to the unproductive government Uber class
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i fully support the usa defaulting on its debt. if its broken and you keep on putting glue/tape on it sooner or later it will break breaking it sooner than later is better.
Why didn't u talk China already reduced it's US debts holding from 1.3 Trillions to 800 Billions and keep offloading it?
31 trillion my butt, Kissinger/pentagon steals that over the weekend :P
Why do you believe a government that makes it's own money can go broke in the currency it makes? Also why do you still believe our taxes pay for government operations when Covid proved we don't tax or issue bonds to spend. If we want to spend money we do and don't raise taxes or sell bonds to do it.
US National debt is nothing but an accounting record of all the dollars the US Federal govt has spent since inception, which is has yet to tax back and sits in our economy as our savings. It is not debt at all, its part of our money supply and there is no problem with it other than the distribution of those dollars.
Its not something our grandchildren will have to pay back.
Its not a burden on our children.
The Fed govt can make any amount of payments it wants to and does not spend peoples taxes. The difference between spending and taxes is the deficit, which necessarily equals our SAVINGS.
It's almost like there is a large cohort of aging people who have no issue borrowing against their children's future.
It's much more than that... It's kind of cyclical imo with a little bit of external influence
Yeah we need to get rid of the old people, because young people are great with credit. 🤣
Nah... let's JAPAN PAY FOR IT
After all, we're freely handing them a world that is already been built. They will do the same for their offspring. This is how life works.
We're borrowing against our children's futures in more ways than just our national debt. We're building unsustainable infrastructure systems that they won't be able to afford to maintain, and we're polluting the environment for them to either pay to clean up or live with the health consequences of.
Italian here. We, too, had a period - 1980s - where our debt exploded until the markets were worried we would default. We didn't default - that's good. Our economy remained stagnant for decades, because taxes couldn't be lowered while our government could hardly afford any kind of stimulus - that's bad. Also, we are vulnerable more than ever to pressure from financial markets. And the chances of going back to a manageable debt are close to zero, which means lifelong state slavery to debt owners. So, no, you don't want to be in our situation even if "we are still not going to default". Just saying.....
It is a bit different because the US can print the currency it owes its debt unlike Italy.
I think you guys are still in this period tbh
Amerikkka is spoiled...hence it's printing press goes nonstop cos the is enslaved by the $ cos world runs on it atleast and indefinitely will see till other credible baskets come to bear
us will just print more $$$
"Taxes couldn't be lowered" yet they were lowered, for the most wealthy People and thé biggest international compagnies how evade happily Taxes.
Richard is blinded by the economic doxa. A sovereign state is not à compagny. A state could decide to tax 20% of any wealth above a certain threshold. It has been done in the past (France, 1946-1949). Abstate could also tax at an exorbitant rate above a certain pay grade : USA under eisenhower had a 97% marginal tax rate.
It never ceases to baffle me that approving borrowing is a separate process from approving the budget. The budget has implied borrowing in it, why would any sensible system not also authorize the government to borrow as specified in the budget?
It’s simply so they can have this fight every year. Just like china’s most favored nation status back in the 2000s. It’s non debatable but it was brought up to debate regardless.
Because automatically writing yourself a blank check is not actually responsible. The whole point is to place a constraint where the people spending the money have to actually explain why it has to be borrowed rather than the country working off existing tax revenue.
@@defenstrator4660 so its simple, any time we have to pass a bill that increases government spending, pass a debt ceiling increase to compensate. you are already showing where the money is going, its going to this new spending venture.
@@ShadowAraun Yeah, that’s missing the point. The reason the debt ceiling is there is to try and stop spending money you don’t have. Unless it is some sort of future benefit borrowing is simply stealing the money of those in the future to spend in the present. You get the stuff, they get the debt. The idea is that if you should not be able to simply borrow and tax. That there must be some fiscal responsibility to live within your means. It can be done. During the 90s both Canada and the US had balanced budgets. So why people treat it as an alien concept is beyond me,
@@defenstrator4660 the idea of raising the ceiling being tied to bills that increase spending is EXACTLY to limit the bills that increase spending. so we can stop spending money we don't have.
Well, it's nice to know that most investors and banks aren't skeptical of the US's ability to pay it back, yet.
Edit: But still, maybe congress will do more damage than the size of the debt itself.
Mostly because they don't have a choice. If you want a dollar denominated loan, you to buy treasuries
US doesn't let "choices" to emerge or stay. Because it will crumble their establishment.
More importantly its allies helps US to do that for easy US-Pound & US-Euro swap.
The US can really do anything it needs to keep the markets ok, but can the average citizen be able to handle what the government puts them through.
what choice do they actually have? the reality is that nobody believes the US is paying back anything, but they have to act like it. otherwise their companies will collapse along with the US and the dollar
There is technically no debt crisis if the debt is dollar denominated, as the country can always print money. The real risk is foreign countries' loss of confidence in US dollar. This depends mostly on how fair and well we treat the other countries and whether they believe that we are a "stable partner" of trade. This latter part I am not so sure with what we have been hysterically doing in the past few years.
Exactly
The crisis comes when you devalue the currency and destroy every dollar denominated contract, including loans.
No. Thats not true. Everytime you print money, the value backing it gets divided by the increased amount of printed dollars. If your gdp does not increase to compensate for the increase of debt or printed dollars, your purchasing power goes down. Hence inflation. This idea that you can do this with no consequence is blatantly false.
quippy: The country or, government, does not print money. The Fed does.
@@LuciferArc1 you contradicted your own point. First you said the value backing dollars is divided every time you print money, then you said that is only the case if the gdp does not increase. Which is it? does it devalue every time you print, or only when theres no growth?
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Regardless of how bad it gets on the economy
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It's not up to date it's already it's months before it should upload this
Ugh, spambot thread
🛑🛑🛑🤖🤖🤖
Every time US is at its debt ceiling the they remember one song "So we put our hands up like the ceiling can't hold us "
They better do it cos US is in trouble if they don't increase it.
@@kicapanmanis1060 increasing the dept ceiling will only cause more dept, the more dept the more the U.S. dollar will lose value. No value, everything will come to a stand still and everything will probably crash. They’re only causing more economic damage by not paying the dept.
0:06: 📉 The US government is at its debt ceiling and may default on its debt, causing severe consequences for the economy.
3:43: 📊 The US government has been accumulating federal debt since 2001, with an average annual inflation-adjusted pace of 5.7 percent, leading to the need for frequent debt ceiling hikes.
6:41: 💰 The United States has a larger economy and more industry diversification, giving it more access to capital and lower reliance on crucial imports compared to other countries.
9:31: 📈 Despite a massive debt load, the US government has been able to borrow at low rates, suggesting market confidence in America's solvency.
12:34: 💰 The government should prioritize managing the debt balance before interest payments to avoid a debt crisis, as seen in Greece and Sri Lanka.
Recap by Tammy AI
11 months passed a little over 34.2 trillion dollars now
34,9 trillion $ right now
36 trillion by the end of this year and annual interests would hit 1 trillion per year.
It's almost like nobody cares about how much debt we have...
How does it increase this quickly. Damn
@@Vladimir_Gluten Mis-management, bad policies, horrible future-proofing, loss of jobs... The list is so insanely long.
In total, the biggest factor here is excessive spending. The biggest contributor to that is the loss of jobs in the American market. We don't make almost anything anymore. This means the U.S. literally cannot sell more than we buy in goods from other countries. Instead of fixing this horrendous mess, however, we just keep printing money. This kinda, sorta, barely works to prevent the U.S. from going bankrupt but also means that the U.S. citizens and other countries that trade in USD are being affected by the inflation that this causes. (AKA, this is the part of the equation that makes it so nobody can afford groceries.) This "strategy" means we aren't paying the debt, just pushing it off at the cost of destroying the actual value of our currency. In other words, if a handful of countries decided that they wanted all their money today and not for us to pay it off like a loan, the U.S. and all that live inside it, would now be subject to who knows what because there is zero historical precedence for a super power with this much debt collapsing, and collapsing with as much weight as the U.S. currently carries.
*Starts sweating profusely*
I'm not freaking out, you're freaking out!
All jokes aside, it's a real mess and nobody agrees on why it's happening. This is a combination of what I've heard and some small personal insights from my collage economics class. Maybe this is helpful to you.
US Debt - let’s see how far we can stretch our reserve currency privileges before it breaks
Let's cut out the engines of the plane in order to see what happens
"What happens to those nations that run out of cash either one goes commie or ones goes fash. Million dollars for a loaf of bread can't wait to bash my neighbors head print money. "
Remember this song?
I find it unnerving that Warren, Sanders, and AOC claim that having a reserve currency means we can spend infinitely without consequences,
_and people believe them._
@@badluck5647 Hey hey hey, not every politician has the time to read history okay? Pandering to political extremism is very time consuming I’ll have you know!
@@NormalPerson053 Not necessarily, the UK lost its reserve status and have managed fine (until it decided to shoot itself in the foot). But yeah that’s a gamble best left not taken…
"Who is going to pay for all these government bailouts? That's out children, our poor, poor children." - The Onion, 2009
(pundit ratings plummeted in the first half, skyrocketed in the second)
And I happen to own multiple post office boxes
Not just the children in the USA. The rest of the world and their children pays too.
what children? We have the lowest marriage rates and births rates, and it's keep declining
having children will be too expensive and people will avoid having them. The tax slaves the government is expecting just won't be there.
A lot of billionaires and millionaires are being made everyday but none are contributing to the debt ceiling. Imagine being a millionaire but your country’s debt is in 31T 😂 fake rich i may say
One small, but important correction, @9:00: Instead of "Even with a massive debt load, the cost of maintaining this debt is actually lower than it's been in the past", it should be "...is actually *relatively* lower than...", right?
Correct.
Good catch! It slipped my mind too
I’m so glad our politicians who don’t have to live with the consequences of the debt have decided to keep raising it even when we are in expansions.
Its because people can't stomach the idea of having to deal with spending cuts and a slow down of quantative easing
But what are the consequences? Economists do not agree on when the tipping point is or if there even is one. The US has sovereign currency that isn’t beholden to the price of a good (ie a Fiat currency) or another government (Euro). Running a surplus takes money out of the economy through taxation. Government spending stimulates economic activity, either by adding to the capital stock (roads etc), wages (government employees) or direct transfers (tax credits, assistance programs, social security, etc). Running a deficit ensures that more money is distributed. Inflation can be controlled by both interest rates and through taxation. Your retirement plan, social security administration, banks, and long term investors use bonds as an investment tool. If the government didn’t issue treasury bonds then you wouldn’t have access to a long term and safe investment. You’d be reliant on real estate, stock prices, or business investment as your only means of investment.
As they should. The debt ceiling is about paying debts that have already been incurred, mostly through obligations that have already been approved by Congress. Reducing government spending during economic expansion is a budget conversation.
what are the consequences of the debt? A functioning government? Growth?
@@grimaffiliations3671 everyone can ask to be paid at the same time 😈
We will take extraordinary measures to stay within debt limit
-Ends up raising the debt ceiling again
the debt ceiling makes no sense
@@grimaffiliations3671 There is technically always a debt crisis with fiat currencies as every single printed dollar has interest on it and it is basically a loan of dollar + interest. Problem is at the point of taking the loan/printing currency, funds for that interest do not exist so we could never pay our loan back completely. This is why deficit spending is crucial.
@@anton3437 every printed dollar doesn't have interest, the fed just sells bonds equivalent to the difference between spending and taxes, and those bonds are the ones with interest. But the fed only does that to control interest rates, they could deficit spend without selling bonds if they wanted to
@@grimaffiliations3671 dissolve fed
dissolve dollar
Waiting for dedolarisation
The thumbnail for this is probably the best to describe the video and how he feels about the debt ceiling
I'm going to call myself 'the person who is fiscally conservative' in the relationship while spending as much or more than my spouse
Nice twisting of words
@@jonnyd9351 ?
just a reminder that neither party cares absolutely nothing about debt when they are in charge. so, it will rise. will that ever matter to the one who has the biggest GDP and biggest military? probably not. but then again, they are being awfully sweaty about china and encircling them for really no good reason.
@@Redmanticore I agree, my point is one party lies and says tells their voters a story which sadly many of their voters believe. There's a reason fox lies and misinforms their viewers.
@@jonnyd9351 explain
Lol just had a funny thought. Imagine getting a letter through the door saying ‘You owe us $31.4 Trillion’. 😂
That’s pocket change
@@tioswift3676 Oh really! Try carrying $31.4 Trillion in loose change and get back to me 😂
@@tioswift3676 you from Zimbabwe
@@jirachi-wishmaker9242 hahahaahaha
Perhaps not such a bad thing. Two possible outcomes: you convince others you are successful and can make the payments (thus they are invested in your continued success) or they are unconvinced and seize your assets. Good luck.
Or thirdly, debt forgiveness though that is somewhat in category 1 of convincing debt holders but now we're approaching levels of nuance involving debt and politics that I can neither articulate nor understand properly to succinctly write in a comment.
I didn't see an animated video of Plain Baggle since 5-Minute history lessons, I love this
Your name is longer than my biography. Legendary
If u know mandarin it’s pretty funny
I'm not gonna lie. I was expecting the usual "sound the alarm we are all gonna die", but I was pleasantly surprised to see the opposite. Thank you for your work
Eventually, this will economically destroy America. It is no joke. Math doesn't lie, politicians do.
We are in big trouble. The debt service cost is exploding. It will be $700 billion by early 2024. That is close to what the federal govt spends on the military.
anime and lgbtq always wants to keep you on edge
@@MrPaxio lool what?
I can't remember the book at the top of my head but read a book that studied debt and defaults of countries across history and found very little correlation between debt-to-GDP ratio and defaults.
Which itself doesn't mean more debt = good but a country having high debt to its GDP doesn't mean it will more likely default on them. How the debt is managed and serviced is more important than the actual amount of debt.
Yeah, russia had a low debt to gdp ratio in the late 90's and still defaulted, meanwhile japans' debt is twice the size of it's entire economy and it's fine. What determines whether or not you default is whether or not your debt is in your own currency. If it is, you're fine
@@grimaffiliations3671 yeah, but the problem is, you become reliant upon said situation and if and when that changes you are now saddled with a mountain of debt. The US is lucky right now that the world at large is favorable towards us and sees us as a good trading partner. But that can very easily change, especially with China looking at large.
@@howardbaxter2514 But the nature of sovereign debt means you can conduct fiscal policy however you see fit regardless of any changes in trading patterns. Because a nation that borrows in it's own currency does not need domestic of foreign investors in order to spend or control their interest rates. The world could stop being favorable to the US, and it could lose it's reserve currency status and it would still be able to operate the same way. After all, plenty of non reserve currency nations operate this way today
The US wouldn’t be affected on current debt/bonds. That’s the problem for the debt holder….suckers!!!😂😂
But it would affect future US borrowing…😢
Btw, US also a holder of current US debt.
@@howardbaxter2514 It can change, but not very easily. It would be very hard for anyone to replicate US value to the world, as you have to be actually physically capable of doing so, and no one is close yet. US military, specifically Navy plays a large role in this and its not likely to change to near future.
Would this be a bad time to point out that if Bush Jr had just continued Clinton's budget policies, the US national debt would be completely paid off by this point? It seems like a bad time.
People also forgot that the one law that actually got passed through the Trump presidency was a $T tax cut to millionaires and billionaires.
Nothing was/is stopping them.
That’s irrelevant unless you can go back in time.
You wouldn't want the US to be entirely debt-free though, as that would also dry up the government's credit. Budget surpluses (which are problematic in their own way, but that's a different conversation) would have created an incentive to offer more Treasury bonds.
That’s incredibly misleading. The 1990s were a completely different time before 911 2008 and the pandemic.
Hey Richard… would you consider doing a segment on Stephanie Kelton’s book (The Deficit Myth)?
I find her argument quite compelling.
Cheers
would be great to see the analysis of the Chinese state debt. Great video! Thank you!
the sole reason why US can sustain such a high debt is simply because of reserve currency status. However, with more countries breaking away from the dollars for their trade and reserves, that will be less demands for dollars which will slowly degrade the reserve status. While many countries would not want to immediately crash the dollars since it will also put them in a bind. So what many countries are doing now is mainly to remove the dollar risk and weaponized against them while at the same time they slowly unload dollar bonds so as not to shock the system too much.
USA: we have special empire priviledges that are used like a normal part of life and it doesn't ever go wrong at all
they don't have empire privileges, they just have monetary sovereignty like a bunch of other nations
It should be pointed out that things we all agree we need are not the things that are super expensive and causing problems.
The vast vast majority of government spending is for healthcare and social security. Then the military.
@@EdMan102292 Yep. Things like infrastructure cost almost nothing compared to those three.
@@EdMan102292 That's one fact that endlessly pisses me off about people who complain about things like US healthcare and welfare. We already spend 1/3 of our budget on social security and unemployment and around 1/4 on healthcare. The military spending is higher than most countries at around 15% but that's in large part due to the fact that the rest of the world depends on the US for security. As the war in Ukraine has proven Europe hasn't been spending their fair share and relied on America to pick up their tab for the last couple decades and that's just one area the US safeguards. Even then the US military spending isnt high enough to solve all or even most of our problems; most experts say a country should spend around 2% of their GDP on defense and the US spends a little over 3% so even if they got it down to that 2% level it would only free up around 5% of the budget. That isnt a silver bullet either, most military spending goes right back into the economy in the form of infrastructure, R&D, and public works and further gets some of the costs recouped by selling equipment to other countries. The US also sends a lot of aid in the form of "military equipment", even humanitarian aid is taken out of that military spending since things like food aid is often in the form of MREs and the US military conducts things like rescue operations and disaster relief (just look at the disaster in Haiti).
nothing is causing problems. The US debt is perfectly sustainable, because the fed has ironclad control of our interest rates. They will always make sure inters payments are below the growth of the economy
@@grimaffiliations3671 That isn't always going to be enough to avoid issues. If that was the case the government would have gotten rid of the debt ceiling permanently long ago.
The problem with continuing to raise the debt ceiling is that one day they are going to go up and ask for so much that they are going to make an argentine, in other words, from one day to the next all confidence in the US public debt is lost and creditors are not going to lend (default)
I mean only if dept as a percentage of GDP is increasing. If the debt is increasing more slowly than the economy is growing then we could hit debt ceilings while literally owing less and less debt.
@@EdMan102292 right now, tomorrow exists
Silly me expecting this guy to explain why US overprinting more than their GDP every year is good, but all other countries doing the same is catastrophic...
Did you find a good video explaining it ? I don't understand it at all
Only 31 trillion debt
Those were the days
Is the US borrowing from the Iron Bank from Braavos? I remember in GOT that Tywin said the crown has borrowed so much, he wouldn't even give a specific amount.
One could argue that the only reason Japan has not defaulted is because of their US debt collateral. Therefore, if the US debt comes into question, Japan will certainly default.
That's not true at all, it's because they have monetary sovereignty. All their debt is in their own currency, just like the US
If the U.S. defaults, it would cause world-wide economic panic.
@@grimaffiliations3671 true but like howard says, if we default, almost everyone defaults
@@noahjones9833 No, Japan would not default. Heck they've already retired half of their national debt
@@noahjones9833 sure, but we have alternatives, like russia and china. world wont end if America fumbles. it just gets a new management.
Alarmists gonna alarm. Good thing we have Richard to keep things nuanced!
would love to see a video about Argentina's debt crisis as well!!
Fuck Argentina
The reality is that the Congress could vote to remove the debt ceiling completely like many other counties have done. In doing that, they would also have to agree to let go of that as a bargaining chip. If it’s gone, no one can use it as ammunition or hostage taking.
That is more the issue. Getting them to agree to loss of control they feel from having a debt ceiling.
It's a shame we spend 9.7% of the budget in interest payments. 9.7% of the huge federal budget so much money they could do so much good.
Yeah, why should that debt be repair.
why? Theres no opportunity cost to interest payments
Imagine Richard playing fallout and considering the intricacies of wasteland economics... Video request here.
You mean, other than offing a merchant and taking all his stuff?
@@Loislikes If you off all the merchants, who's going to buy all your loot? Merchants are the only npcs that make it to the end in every game.
@@roberts.9299 Not every merchant. Just the ones with good loot. 😂
Before 2008 crisis, the market believed that the housing market would never crash.....
Nothing is forever
The most interesting part on 10:11 is how the numbers change from right to left.
If you notice the chart at 1:52, our debt remained very stable at around $3 trillion from the period after WWII until 1982. During this period, we taxed corporations and the wealthy at a very high rate with significant deductions and loopholes for investing back into our economy. Our middle class was at its peak at around 65% of the population, we had labor unions, the stock market rallied, we fought a war in Korea and Vietnam, and put mankind on the moon.
Beginning with Reaganomics around 1982, we offered large tax cuts to corporations and the wealthy, and our debt grew almost every year since. Since then, our middle class shrank, wages no longer kept pace with productivity (stagnated), our mother's entered the workforce to keep up, our savings went negative, and our personal consumer debt grew (in part funding China's growth). At the same time our production went abroad, and the wealth gap has increased.
The majority of our national debt today is owned by Americans with only $6 trillion owed to other countries, including a little over $1 trillion each to China and Japan. Much of our debt is in private and public retirement accounts, social security and Medicare, state and local governments, and our financial system to include the Federal Reserve and support for the dollar as a global reserve currency. Our debt is a measure of our economic wealth and power.
Bottom up works and top down doesn’t? It’s almost like literally everyone knows this but everyone that can make changes are benefiting from the current system so they refuse to make any changes.
@@rttrttyan I believe you're right about people benefitting from top down lobbying and campaign contributions.
In my view, it's not so much top down doesn't work. It does. Milton Freidman's "greed is good" laisses faire (Reagan) economics simply goes to where the returns are as a matter of self interest. People keep more of their money to spend it as they see fit. Like big tech rather than rural brick and mortar rural small businesses - once the backbone of the US economy and our consuming middle class nuclear family.
The government spends bottom up where financial returns do not matter as much. Infrastructure, for example, is less about financial return to the government and more about returns in economic growth, the public good, and creating jobs. We avoided the near certain recession (I think the inverted yield curve was more about lower inflation expectations than a recession indicator).
I argue the Obama's "supply side" recovery from the 2008 financial crisis was (politically) sluggish (for a 1 term president) because returns were found in emerging markets abroad and fracking in the US - generally speaking. Both benefitted from a zero interest rate policy. The post lockdown recovery was more rapid because US consumers had stimulus money to support opening of shuttered US businesses.
@@RoobieRhoo 1 term president? Also any recovery from the financial crisis that Obama did, Trump wiped away with his 1 term.
@@rttrttyan I'm sorry for not being clear. I was paraphrasing Mitch McConnell who promised to make Obama, "a 1 term president." I think this was part of the motivation for not providing sufficient stimulus to main street in order to ruin his presidency. Meanwhile a lot of people were out of work, lost their homes, and could not retire. This actually began the populist movements in America, including the Occupy Wall Street, Tea Party, and MAGA.
It took nearly 5 years for unemployment to come down to around 5% when the Fed began to tighten the money supply in 2013. By the time Trump took office the unemployment rate had fallen to around 4.5%. Trump and his supporters were so proud of "his" economy. In fact, it was primarily driven, and necessarily overblown (quantitative easing), by the Fed during Obama's term just to get inflation grudgingly up to 2%. This was painful trickle down economics in action.
Don't forget about the insane amounts of debts that the decades long war on terror brought us. Before that we had almost no debt. I know there are many factors but that's a huge one.
“War on false terror” to be exact, we didn’t belong there
I wish I knew which topics were inherently politicized when I was younger. Maybe some good professors mentioned it but I always got the average to below avg profs due to registering late. Took me until being an adult a few years before I noticed this happens every year like american idol.
While it may not be an issue right now, I just can't comprehend how this problem will be addressed without a debt crisis in the future.
it wont be an issue in the future either
@@grimaffiliations3671 see, I’m calling absolute bullshit on that. It will be an issue in the future if we don’t take steps to mitigate it. You say the US will be fine, but what happens when our allies and the world decides to not invest in us? What happens when the international laws we hold dearly break down, and the debt collectors of other foreign entities come calling? Such a notion baffles me, especially when history tells us otherwise. We are likely one series of unfortunate events from all of this going out the window.
@@howardbaxter2514 We'll be fine when the world decides not to invest in us, because foreign investment does not determine our ability to conduct fiscal policy as we see fit. That's the beauty of sovereign debt, you cannot default on debt denominated in your own currency
@@grimaffiliations3671 the debt to GDP increased from 30% to 120% in the last 40 years. Debt servicing will soon be the biggest subject of government spending, above social security, and military. This isn't a sustainable path
@@mephistoss238 It is sustainable, debt to gdp ratio is not what determines your vulnerability to default. Russia's debt to gdp ratio was low when they defaulted in the late 90's, meanwhile Japan's debt has gone up as high as 250% and yet they've never come close to default. Whats the difference? One had sovereign debt, and the other had debt denominated in foreign currencies. That is the key to assessing your potential for default, how much of your debt is in someone else's currency.
If anything is unsustainable, it's a balanced budget. Because the private sector relies on government deficits to stay afloat. If the government balances its budget, it would be pushing the deficit onto the private sector, thus causing a recession. Every recession in US history has occurred after a period of deficit reduction
I really appreciate that your content model isn't panic for clicks.
Funny watching this around a year later and debt from 31.5 trillion in this video to around 34.5 trillion now.
Would be interesting if you'd made a video on the aftermath scenario of a U.S debt default...we all know it's gonna happen one day
Absolutely - when Argentina defaulted 20 years ago it had little impact on the world economy. But if America defaulted the impact could have a domino effect on other highly indebted countries (Japan, Italy, Spain, Greece) and so maybe the Euro Zone could also become contaminated??
@@JoBo301 Argentina is not the same as having the world's reserve currency like U.S
@@yamuiemata and that's why I said it had little impact
The US won’t ever default. It will make its citizens suffer through hyperinflation and a currency reset.
Depends on your definition of one day. 200 years from now I can see it. Near term very unlikely. Possible but unlikely.
And Treasury Bonds are payed out in a Currency that the Bond Issuer (US Government) has a monopoly on the creation of.
Super informative and didactic as usual, you are such a great lecturer. Any thought about becoming a professor?
I think it'd be interesting to hear this analysis again with updated information from this year.
It’s approximately one year later and the debt is now 34.5 trillion.
Thank you for another great video mate. I enjoyed every second. Please keep it coming.
Love these videos. Loving this editing too.
The question is simple, how can you keep use more money than your income? Any country, any company any organization? Any family can do this forever?
no, just governments who borrow in their own currency
Every single person can think of at least one thing which they think the government shouldn't be spending money on. And yet, the spending goes on and on.
Something I really want to look into and break down, is how much of the spending is actual, unadulterated waste. Depending on how substantial said waste/corruption spending is, we may not have to cut back from our big time programs as much as we initially expect. Remember, little things add up quickly, and it is those little things that are likely hurting us the most.
@@howardbaxter2514 Exactly. Problem being that politicians get better jobs once they stop being politicians, if they expand the amount of waste.
And guess who's regulating the regulators.
If the government defaults before late December, Then that will make it the 4th once in a lifetime event I’ll have lived through before I turn 21.
You're living through the Great Reset. You ain't seen nothing yet.
Who wants the US Debt to decrease...
🙋♀️🙋♀️🙋♀️🙋♀️🙋♀️🙋♀️
Who will vote for a candidate that increases taxes and decreases social programs...
...
That is why it is foolish to aim to cut the US debt. The private sector relies on government deficits
Or they could maybe start holding some of these government agencies accountable for having taxpayer dollars just disappear. The DoD hasn’t passed an IRS audit is 20 years and there is something like 3.1 trillion dollars that they just have no idea where it went. That is 3.1 trillion taxpayer dollars just disappearing into thin air that could be used to stimulate the economy or pay off debt. The DoD is also only one agency, there are plenty more with probably just as high amounts and money like that stacks up FAST.
Corporate taxes 9% vs Individual Income taxes 54%. Can you guess what happened around the 80s when debt started to climb? The loopholes made things worse over the years.
Exactly
Keep them coming sir. I love your videos. A trained professional educating the public, it doesn't get any better.
The debt isn't the problem. It's a symptom of the actual problem which is government spending.
The simple point is this: the debt to gdp ration is rising. The US cannot forever just keep printing more money - no really that strategy only works while you have new markets to exploit and you can hold on to your existing markets. When other nations industrialise, break free from your control, seek deals with other major nations and when other nations figure out a mechanism of payment that doesn't require your national currency - at that point the cracks in the dam you are noticing now will spread at a lightening pace. When? Highly unlikely this decade. Best GUESS - mid to late next decade.
It’s indeed quite educative lecture with unbiased elements n logic.
Putting a bunch of descriptive nonsensical words together doesn’t mean you’re smart
An important thing to also remember: for USA to remain the main global reserve currency, everyone needs access to USD...which means, on average, there must be more dollars flowing out of the country than in the country. This incredible economic power comes with a terrible cost of being mathematically unsustainable by its very nature.
I'm not too worried yet...but there is NO sign of spending decrease on the horizon on anything from war to debt forgiveness---it's all like cost has no meaning here
the US would be able to operate that way even if it were not the reserve currency
@@grimaffiliations3671 except such a burden gets put on the average American through stuff like inflation. What happens when there is an internal revolt within our own country? Investors will begin to bail, and we will be saddled with the debt.
You have to have a major hubris to overlook these issues.
I understand the issue isn’t as dire as it seems, but to brush it off as a nonissue is beyond foolishness.
Im kinda confused as to what it means for government to be a holder of its own debt. Is it equivalent of me having creditcard debt but instead of owing that money to the bank, i owe it to myself? If that's the case, in what sense is that really debt then?
I’m not an economist but someone in another comment here kinda answered you. They said the problem is not the debt at all befause we own the currency. The problem is other countries’ belief in our currency. If we push our privilege too far and another world currency is established, we’re screwed.
Maybe it's just because I'm young, but this all seems NEEDLESSLY complicated. Too many variables and stats to something that's too simple.
Thinking about it as a common citizen, if I don't repay my debts, people come 'A-knockin'. Assets get repossessed, wages garnished, etc. When citizens don't pay the fed, it's a problem. But when the government don't pay.. ??
Why is there little to no reparcussions for governments? They mismanage their money but the people of that country are penalized for it?
There's an advert on this video which is offering a scheme exactly like those you have warned us of in the past. "You may doubt my strategy.. so lets take this one individual case where it's been successful as an example"......
A much-needed video
Keep in mind a lot of the cost of servicing debt goes to pensions and citizens- the public holds some 24T of that government debt!
We whistle past the graveyard of our Social Security outlays. Funny how even high schoolers were talking about that 20 years ago and now it's the third rail of discussion. I sure would like to see a contraction in our military spending, at least. But naw. No can do.
@@JeredtheShy Military spending is totally in-line with other country's military spending. Sure, we spend a bit more, but not by any significant margin. The fact that the general american public holds the vast amount of our national debt means that the situation is not nearly as dire as other countries. Hence why the bond prices are stable despite the increase in debt load.
so what? The US getting to a point it won't be able to service its debt, meaning millions that were counting on that money from the government to finance their retirement will have to make do without it.
@@ultimaIXultimafalse
No other democratic country spend that much
US debt is a strange thing and acts so different from other countries because it's the world reserve currency and has so much pull in the world geopolitical and economically and no one can really hurt it
For now. There are a lot of countries that want to see this change. Checkout BRICS (Brazil, Russia, India, China and South Africa) who are a real threat to US dollar continuing long-term as the world reserve currecy.
Each year the US influence over the world becomes more and more oversized in comparison to its size. Each year the US is getting more belligerent. I can't see the world allowing this to go on in years to come.
Most sovereign currency act the same Regardless of being a reserve currency as long as they have resources
There is nothing strange about it. The only difference between the US and countries like Argentina or Greece is simply that the US credit limit is much higher. But there is a credit limit make no mistake about it
Well yea that's the reason. Economy is built on trust (obvious yea but something people really underestimate).
It's the same reason the pound is so powerful. People like it and trust it, so it is.
Good one here Mate!
I think it's a bubble, it's clearly shown by the unexplainable investor confidence. The debt to GDP will keep growing, US will start to print more money to support GDP during crises. As the USD becomes less of a reserve currency worldwide and interest rates decrease, investors will slowly opt away leaving the US government in need for money which will make them print more and more leading to a total collapse of the currency. This will take 5-15 years to play out!
Imagine the US dipping into default because of politicians playing chicken, haha… ha… ha…
Republicans. Call them out.
That's actually illegal. The Fourth article of the 14th amendment makes it illegal for the US to default on its own debt.
Edit: Oops, wrong section.
@@Policyparagon The government HAVE to reduce spending and raise taxes. You can't continue kicking the can down the road.
@@Policyparagon Nah. This bullshit is present and common with the entire political sphere in the US.
@@Policyparagon We are going to default eventually through not paying, or inflation, better to do it honestly and get it over with. We need massive cuts to government
For the love of all things, they should never allow a default to ever happen under any circumstances ever!
That would be very very very very very very very absolutely horrifically bad.
Government: oopsie 😅
@@kevinfernandez9999 zero doubt yo
I mean we all know they will just raise it. We go through this every time. Media makes us scared and they just raise it and they make it look like they saved the day
republicans should be ashamed of themselves for playing these games
The idea of the world's largest economy failing to pay its debt is pretty mind blowing.
Not if you read history!
it won't fail to pay it's debt tho, they will raise the ceiling. This is just political games from the republicans
@@grimaffiliations3671 Are they going to keep doing this until America owes 100 trillion?
@@FictionHubZA They can stop adding to the debt whenever they want, selling bonds are not necessary to finance government spending. But they don't want to get rid of the treasury market. The national debt could just as easily be called the national savings account
The “largest” economy that is dominated by the service industry. That sure is reassuring. But the Hopi um is much appreciated.
I think we should stop paying politicians. I bet they find another way to fix the issue. If they can't pay their bills
The problem with the US government's attitude to debt isn't that a crisis or collapse or default is looming, it's that they have come to rely on being protected by transient features of the economy.
* We can keep borrowing more because GDP goes up (until it doesn't)
* The dollar being the world's reserve currency depresses inflation (The pound used to have this position, look at the UK now)
* The markets don't see a problem yet (but once they do, the spiral will have started and it will be too late to prepare)
These are bad habits that need to be addressed before, not after things start going badly.
The fed has ironclad control of our interest rates, so they will always make sure interest payments fall below the growth of our economy. I wouldn't say our reserve currency status has any bearing on inflation. What do you mean look at the UK now? You make it seem like they defaulted and are currently dealing with hyper inflation. They're fine
Great video! Would you be interested in doing a video on the “petrodollar” phenomenon? It’s hard for me to differentiate between propaganda and facts regarding this issue…
@dd why?
I just came here to say that this video's thumbnail with you peeking out from a sea of bonds is hilarious. Thanks for the laugh
The average maturity of the debt is about 5 years so current interest payments still mostly reflect the previous super low rates. Right now expiring debt is being refinanced at 4-5% interest rate, if current rates stay for a few years interest on just the current debt will be around 1.5 Trillion. About Twice what is being spent on defense !
The U.S was running a Trillion dollar deficit during "the good times" before COVID when it should have been paying down the debt. Now it is at 1.5 Trillion, recession is knocking on the door and there is nothing left to fight it with.
The US debt situation is quite alarming, with the federal government reaching its debt ceiling of 31.46 trillion US dollars. While the government has been using extraordinary measures to prevent a total shutdown, if the situation is not resolved by July to September, the US could default on its debt, which would be catastrophic for the economy. The political discourse seems to be causing the issue rather than fiscal demise, as the debt ceiling can be hiked at any time. However, the fact that the government keeps needing to push this debt ceiling higher and higher is a real problem. The US is far from a Greece or Sri Lanka-like outcome, even with a massive debt pile. The funding for government costs comes primarily from taxes, with the single largest source being individual income tax. Whenever the government spends more than it earns in a given year, it needs to borrow the difference through the issuance or sale of Treasury bonds. Total debt isn't a good gauge of a country's solvency, as the size of a country matters, too, which is why economists often look more toward a country's debt to GDP when gauging a country's debt burden. Unfortunately, this measure isn't doing well either, with the US at 124, which is the highest level it's been since the end of the Second World War. While the US has seen a jump in debt every time it experienced a severe economic shock, it's crucial to note that a growing debt balance may not be all that concerning if a country's size is keeping pace regarding its economic output.
The US debt situation is concerning. The US has been spending more than it earns every year since 2001, and this trend isn't sustainable. While the debt ceiling can be hiked at any time, political discourse seems to be causing the issue, which is a significant concern. It's crucial to note that the US is still far from a Greece or Sri Lanka-like outcome, even with a massive debt pile. However, the US's debt to GDP measure is currently the highest level it's been since the end of the Second World War, which is alarming. It's essential to monitor this situation closely as a country's size matters too, and the US's economic output must keep pace with its growing debt balance.
Thank you so much for this information. I’ve been asking people for mathematical proof that this particular moment calls for the US to default on the national debt, not that the number is shocking to their senses, but proof that a default is necessary, and I have yet to see one of the people advocating for a default provide one. Politics is the reason why we’re in danger of a default at this moment.
politics will be the only reason we're ever in danger of default. Our debt is perfectly sustainable
You could just pay it back too. But good luck with electing a president that promises to do that
@@asdf3568 ?
@@asdf3568 Most Presidents Promise to Pay the Debt, including Donald Trump who managed to increase it more than any Pres in History. Biden also touted himself as being 'Fiscally Responsible', and he's printed more money than any Pres in History. They ALL Promise to Pay it Down. None do.
@@tsubadaikhan6332 I mean promise to cut expenses and raise taxes. None of them promise that.
Weird how the government is allowed to accumulate an excessive of debts and no debt collectors come calling.
Debt collectors come calling when you fail to make your payments. It's up to the underwriters to decide whether to loan to you in the first place. Anyway, at this point, I'd still trust the federal government to pay its debt more than I would trust any corporation or even state government.
The same is true for Italy, which still has low rates locked in for a while. However if central banks don’t address inflation asap and let it run higher for longer, government will need to roll over more and more of their debt with higher rates and at that time the higher yields are really gonna bite federal budgets. Even if governments would suddenly become fiscally responsible and not grow debt/GDP further, central banks still need to figure out inflation soon. A lot is riding on them. And yes that may involve inflicting more pain with higher rates in the short-term.
Italy is on a house of cards as it entirely relies on the EU to buy its debt. Spain and Italy haven't learned anything from Greece's bailout.
high inflation (and, by proxy, higher interest rates) is bad only for those countries with deficit excluded debt interests.
Let me explain. Italy, for example, without debt interests, would have no deficit, but a surplus. So an inflation spike to 10%, will reduce the past debt by 10% each year. Of course, if a country instead has a big deficit, even wituout considering debt interests, then the situation is more alarming, since higher interest rates means that new debt will be very costly
Germany solved this sort of by making it illegal for cities and communities to take on debt.
Then making it illegal for union states to take on debt.
And then later the country cannot take on debt without a majority.
Although in the USA it doesn't mean much when there's always one party with a complete majority, who doesn't have to form coalitions and make contracts with other parties to ensure their rule.
@@albertofoti4152 same as Australia
I will explain it for every one? This government makes debt, with no plans on paying back one cent of it. No balanced budget, and no repayment plan either,
Two big problems you did not talk about. 1. Japan and China are selling their us bonds. 2. The trillion dollar tax cut to the rich means less income to pay the bills.
doesn't matter if they sell bonds and the government doesn't need taxes to bay the bills
What are the best strategies to protect my portfolio? I've heard that a downturn will devastate the financial market, so I'm concerned about my $200k stock portfolio.
There are strategies that could be put in place for solid gains regardless of economy situation, but such execution is usually carried out by an investment specialist
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You've just explained why the debt problem will not be addressed anytime soon.
we don't have a debt problem. Debt only becomes a problem if you lose control of your interest rates, and that can't happen to a nation with all it''s debt in it's own currency
Pretty easy explanation: politicians dont care about anything past the next election, most of them wont be alive or in office to see most of the effects of their actions, and one of the few things uniting both parties is their desire to spend money like a teenager who just won the lottery. Sadly our choices for each presidential election are "do we elected a Republican and see them lose us tax revenue effectivley 'spending' money on corproations or do we elect a Democrat who will throw mountains of cash at different corporations and raise taxes?"
@@arthas640 Democrats don't throw money on corporations, they throw money on things that help every day Americans like medicaid expansion, medicare negotiated drug prices, child tax credits, paid family leave that sort of thing
@@grimaffiliations3671 They overpay for medications the same as the insurance companies, much the same happens with things like a lot of the money that went towards COVID.
The infrastructure program isn't much different, most of the money goes towards government contracts which are carried out via a public bid structure. They decide what kind of work they want done then accept bids from companies on those projects. This is normally competitive model used in the private sector as well but with government projects they're bloated and inefficient, often by design. For example they require a minimum wage to be paid based off the job, which sounds nice but it's often higher than the going rate for that job. Where I live for example they require you to pay 25-50% above the going rate which is already fairly high for many jobs. They also require you to often use specific materials from specific suppliers like only using GE electrical materials and they often over pay for them. I worked on a school remodel where they spent $1200 per light fixture from a single company who charged that much because they were the only one you could buy it from and there were identical lights selling for around $150 at the time and it was the same for some electronics in class rooms where they spent over $1000 for a normal HDMI cable you could find at Best Buy for under $100. They also will often call it an "open bid" but set up qualifiers that make it difficult or impossible to get much competition so they can give contracts to contractors they prefer at inflated rates (for example where I live construction unions based in the big cities are some of the largest campaign donors and big city projects are often earmarked for unions who dont do much work outside the big cities). They dont even always pay that great with those set wges since there are often loopholes that only a few companies can exploit that allow them to pay below that amount (for example big businesses can get a certification that allows them to pay apprentices a fraction of that set wage, barely above the states minimum wage but it's so expensive to get certified few companies can afford to do it and carry out enough government contracting to make it worthwhile and union companies automatically qualify for the loop hole).
Part of that infrastructure program as well as the COMPETE act also involve the government giving out tens of billions to private companies for R&D. I dont have much insight into that though since that's not the kind of government contracting I've done personally but they're mainly fortune 500 companies that you'd expect to have their own lobbyists.
I vote democrat since they're the best alternative (Trump and his ilk are many hings but "less corrupt" isnt one of them) but look into campaign donors to the party and much like the GOP you'll find a laundry list of government contractors, companies that regularly get bailouts and grants, and the hyper wealthy. Biden for example got most of his money from Wall Street types in the financial industry, the same kind of people that caused the crash in 2008 and got massive bailouts that often ended up lining the pockets of the executives, the same companies who benefited from deregulation like Clinton repealing the Glass Steagal act or deregulation done by Bush and Reagan before and after Clinton.
@@grimaffiliations3671 What happens when The BRIC alliance pushes to upheave U.S.D as the national reserve currency?
Can’t print out the money anymore
Something important to keep in mind is debt is a ratio of spending to earnings. Many forget about the earnings part. If you have a company thats in debt, and your employees tell you they cant afford to ship a product to a customer, your response should be that you cant afford not to. Likewise if the american people are told we cant afford to have a properly functioning IRS, our response should be we cant afford not to.
There are very few things that are negotiable on the spending side. Defense spending is off the table, medicare is off the table, etc etc. Only a tiny fraction of our spending is on the table, and it isnt enough to make a marked difference (thats not to say nothing should be done, only that it wont make enough of a difference to fget back in the green). However on the earnings side we could make a huge difference with minor changes. Start by closing some loopholes and having a more equitable tax system and the debt crisis solves itself. The debt crisis is first and foremost a product of taxes being unpopular with voters, however the tax system still has some common sense fixes everyone can agree on.
Social Security, Medicaid/Medicare, general welfare, and Defense spending can all be put on the table. If they would even just pause the increases in spending, we could have a budget surplus within a few years.
They could probably use a value-added tax
Strongly disagree. There are always areas where spending can be cut. We may say the entire defense budget is good, but when you look into it you will notice a plethora of waste. Same goes for other massive expenditures.
@@howardbaxter2514 im not trying to take a stance over whether or not it should be on the table, only that it would be political suicide so they wont do it, and even if they did we still would be in the red. My main point is that income matters much more than spending.
As a side note, I actually work in defense and Id agree theres plenty of bloat. The problem is the same problem with most government programs, the incentives for government funded contractors and organizations are to spend money not save money (use it or lose it). If we could reevaluate the incentive structure then maybe we could do something about a lot of government spending - maybe not lower it but at least get a lot more value out of every tax dollar spent. We should be rewarded for saving money, not punished for it (by next years funding being lowered if we dont spend everything they gave us this year).
When the Pentagon says it doesn't know where trillions of dollars went every decade.
It would seem that they are responsible for the budget not being balanced.
Also responsible for all of the national debt.
Something I think you should have gone over is Japan. Japans debt to GDP ratio is over 200% and they have never had a meltdown, but they have had a significant stagnation in economic growth. It’s a much better example of what could happen to the U.S. if the debt is not kept under control. Shri Lanka and Greece really aren’t good corollaries due the nature of their economies.
haha 31.4Trillion, its 34.3 now
3T in 11 months, can anyone say UN-SUS-TAIN-ABLE.
I ate a plain bagel for breakfast today
🥯
Take this rock 🪨
My dear. You forgot to mention that the US are projecting to add another 52 trillion dollars in the next 10 years(2033) and that will be a total of 83.4 trillion dollars and you can tell me how a gigantic 83.4 trillion dollars will be sustainable.The United States can keep bragging about having the strongest economy in the world;but if that debt reach closer to 100 trillion by the next decade,with inflation that will keep going up, we will probably start to see countries like Japan,China and UK starting to get rid of those US treasuries bonds to defend their own currencies. We already seen it this time when the dollar when too high and crushed other currencies. Japan and China had to sell some of those bonds to defend their own currencies.In the next decade, if inflation skyrocket and the US debt becomes unsustainable,(83 trillion in the next decade) countries will start to look for alternatives to the dollar like cryptocurrencies and Gold.If those countries start to get rid of the dollar and sell those treasuries bonds, the United States economy will be in big troubles. Let’s start to pay close attention to these 2 things:INFLATION and US DEBT. Those are the 2 things that can bring the us economy on its knees in the next decades
Well said. Personally, hedging my savings in gold and silver.
I love your videos, and this one is also very good in general, but I wish you had talked about the fact the Fed can always reduce the outstanding debt load by purchasing as much of the debt as is needed. Since all interest payments the Fed receives are returned to the Treasury, this is effectively the same as retiring that portion of the debt. The trade off being that Fed purchases of treasuries will (all things equal) lower the interest rate, which may conflict with their stated goals… but it doesn’t change the fact that the US debt, in itself, is never an inescapable burden.
Although it’s less accepted, it would also have been good to see you mention that many economists reject the idea that treasuries represent the government borrowing money in the first place, but are simply functioning to reduce the liquid hard money supply (as evidenced by the justification for war bonds in the past).
My concern in Canada is that not only is the government debt to GDP going up, household debt to GDP is also going up. It's usually better for the society as a whole if those two indicators are balancing against each other
The Dirty Little Secret is ... They NEVER Had ANY INTENTIONS of Paying Off The DEBT .....
Come on!! Many wealthy corporations (Amazon, GE, Exxon, etc.) don’t pay a dime in taxes and need to pay their fair share. When I make over 160,000 I no longer have to pay anymore into Social Security so raise that to 200,000 and I’ll start paying more. Being a text accountant I know the system is rigged against the middle and low income workers. The loopholes need to need to be closed. I should not be paying less taxes than my secretary. The greed never ends!
Similar for Canada, but we will have to take on more federal debt to bail out our housing market, corporate sector, and possibly (Hopefully not) our financial system because of our private debt bubble
What need be said here is 80% of the Federal Government’s operational budget is actually dedicated to the salaries, perks, lifelong pensions and medical and benefits, of federal government employees. We’re paying through the nose to support an immense horde of public “self” servants who can retire at 50, never have to worry about a pink slip, and who, after 1 year of “service” get tenure (meaning they cannot be fired). This public servant more often than not goes “ROAD” at that stage (Retired On Active Duty). What we’re seeing is the greatest transfer of wealth in history from the productive non-government working class to the unproductive government Uber class