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
Much of this debt was added to the financial bailouts during the financial crisis earlier this century. The prevailing reasoning was that certain firms were so large relative to the economy that letting them go bankrupt and being dissolved would have caused massive unemployment and suffering. Should we consider a law or regulation that only allows firms to grow so large? Maybe there is a way to measure the size and market power of firms relative to others and the economy, and just make a law that says firms in an industry cannot be over a certain size. Maybe we do need to limit mergers. That would be a way to avoid the "too big to allow to fail" scenario. Maybe the monopoly or oligopoly rules have been too loose. I hate government bailouts of firms because these businesses have been deemed too big to allow to fail. That just informs me we as Americans, and the government leaders allowed them to get too big. I think we can allow firms to grow too large relative to their industry and allow their executives to have too much power such that when they are wreck-less, and it is deemed they need to be kept operating by government leaders, that we have actually deemed free market principals wrong.
@@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.
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?
@@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.
"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
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
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.
@@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
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.
"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…
What's happening is the USA is exporting inflation around the world. Dollars are in high demand devaluing foreign currencies and making poor people more poor. It's been having a destabilizing effect like this for years.
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.
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 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.
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 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.
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.
@@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.
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
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...
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.
@@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
@@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
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.
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.
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.
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??
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.
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.
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.
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…
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.
@@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
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.
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.
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
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.
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.
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).
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!
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.
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.
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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.
Good one here Mate!
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
Much of this debt was added to the financial bailouts during the financial crisis earlier this century. The prevailing reasoning was that certain firms were so large relative to the economy that letting them go bankrupt and being dissolved would have caused massive unemployment and suffering. Should we consider a law or regulation that only allows firms to grow so large? Maybe there is a way to measure the size and market power of firms relative to others and the economy, and just make a law that says firms in an industry cannot be over a certain size. Maybe we do need to limit mergers. That would be a way to avoid the "too big to allow to fail" scenario. Maybe the monopoly or oligopoly rules have been too loose. I hate government bailouts of firms because these businesses have been deemed too big to allow to fail. That just informs me we as Americans, and the government leaders allowed them to get too big. I think we can allow firms to grow too large relative to their industry and allow their executives to have too much power such that when they are wreck-less, and it is deemed they need to be kept operating by government leaders, that we have actually deemed free market principals wrong.
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.
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?
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.
Only 31 trillion debt
Those were the days
"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
Thanks bud for keepin us financially Educated!
Regardless of how bad it gets on the economy
She's unique in the field just got to keep to her instructions and you Excel.
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
It's not up to date it's already it's months before it should upload this
Ugh, spambot thread
🛑🛑🛑🤖🤖🤖
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
The thumbnail for this is probably the best to describe the video and how he feels about the debt ceiling
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
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'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 be great to see the analysis of the Chinese state debt. Great video! Thank you!
US Debt - let’s see how far we can stretch our reserve currency privileges before it breaks
"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…
What's happening is the USA is exporting inflation around the world. Dollars are in high demand devaluing foreign currencies and making poor people more poor. It's been having a destabilizing effect like this for years.
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 😈
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
Thank you for another great video mate. I enjoyed every second. Please keep it coming.
I think it'd be interesting to hear this analysis again with updated information from this year.
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
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
Correct
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.
Love these videos. Loving this editing too.
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.
Nice work! Thank you
Super informative and didactic as usual, you are such a great lecturer. Any thought about becoming a professor?
A much-needed video
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
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
would love to see a video about Argentina's debt crisis as well!!
Fuck Argentina
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
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.
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
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
Go away
Nice video!
That was awesome…thank you
Hey, if 30 + trillion isn't a crisis 😂
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
Before 2008 crisis, the market believed that the housing market would never crash.....
Nothing is forever
We go through the same debt ceiling limit nonsense every few years. It's just political theatre and should not be taken seriously.
Thank you very much...
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.
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. 😂
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.
Dedollarization? Loss of the petrodollar? Loss of the reserve currency status?
thanks
And Treasury Bonds are payed out in a Currency that the Bond Issuer (US Government) has a monopoly on the creation of.
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
$36.2 Trillion right now, we’re doomed.
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
Great vid!!
Excellent video!
Alarmists gonna alarm. Good thing we have Richard to keep things nuanced!
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
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.
Great video dude!
Good one
Thank you.
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
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.
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.
It’s approximately one year later and the debt is now 34.5 trillion.
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.
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
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.
Wow, that was really well said
Thank you
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.
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?
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.
is it for cbdc roll out ?
Funny watching this around a year later and debt from 31.5 trillion in this video to around 34.5 trillion now.
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
haha 31.4Trillion, its 34.3 now
3T in 11 months, can anyone say UN-SUS-TAIN-ABLE.
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.
Well balanced video.
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.
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
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.
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.
I really appreciate that your content model isn't panic for clicks.
Only 1 year later and we are now at $35 Trillion
I ate a plain bagel for breakfast today
🥯
Take this rock 🪨
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).
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!
The most interesting part on 10:11 is how the numbers change from right to left.
31.4 trillion...... a year and half later its now 35. Absolute insanity
35.7 now
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
OVER 36 NOW 😂😂😂😂😂😂😂😂😂😂😂
In just a year and some months. 😮
@@NikolaStamenkovic6 exponential growth 📈 😆
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
Look at Stephanie Kelton’s work on modern monetary theory