I agree, entirely with that the carrying cost is what matters. However, consider the following: 1) your chart is slightly outdated. Past 12 month interest on debt now stands at 852 Billion which brings it over 3.2% of GDP already. 2) due to all bond yields still rising and having held the 4% level for a while now it is near certain that the yearly interest payments will keep rising as maturing low yield bonds get rolled over into new high yield bonds. 3) IF bond markets would stay where they are, all debt would need to be rolled over into either 10 or 30 year 4.1% yielding bonds or 1 year 5.5% yielding bonds (or smth in between). As debt to GDP stands at 130% (and rising), that means that your graph is destined to set new record highs (yield * debt-to-gdp-ratio, i.e. ~4.5*1.3 = ~5.9) if bond yields stay at current values. Bond yields must go lower long term, they absolutely cannot be allowed to break out higher. If they do, it could trigger a vicious circle where the interest on the debt is not remotely serviceable and thus balloons the debt leading to more interest due on the debt. I would like to hear from you when you would start to say that the US cannot afford it's debt, what metric, what figure would really make you worry about the debt?
The debt we can easily afford? You mean the same debt that Yellen was saying we would default on if we didn’t raise the debt ceiling? Meaning we literally had to raise more debt to service our current debt..
Fisher makes clear in this video he has great faith in the monetary policies of the US government & the FED. However, in another video he concludes the government people and the FED people don't understand anything about "the real world". That's also interesting, to put it mildly.
Thanks for yet another informative and insightful video. I would like to ask a question, if I may, about the price of shares compared to earnings. Currently there are a lot of articles stating that the ratio is way to high and that this will lead to a crash in shares, because they believe that future earnings expectations won't materialize, especially for some of the tech stocks. Is this something to worry about? Thank you.
Why contrast debt to GDP, vs debt to income (tax revenue)? Its more like household debt to income- relevant. Yes, debt service carry matters most with respect to affordability, but relative to income, not GDP. Right?
I agree that spending is the problem, but the debt is far greater than was needed in the last decade due to overspending on non-productive priorities. I think you would agree both are serious problems now.
Fisher makes clear in this video he has great faith in the monetary policies of the US government & the FED. However, in another video he concludes the government people and the FED people don't understand anything about "the real world".
All true but a little misleading. That flat-ish line of debt service to GDP was in a consistently decreasing interest rate environment. That does increase the risk that it becomes a problem if rates increase, as they have. Don't ski to the puck, ski to where the puck will be.
"The private sector creates growth." Yes that's true, but also not the whole truth. The private sector wouldn't create any growth if the public didn't create the foundations. And its the public sectors goals that drives the growth. The connection between East and west USA, public funding and missikn. The space programme, public funding and mission. The internet, publci funding ans mission. Basicallt all the technology we have today is the result, in its essence, of publicly funded research and investments. The workforce that drives the growth of companies have been educated by the public and private sector. In many other countries it would have been only the public sector but the US is different in that aspect. The healthcare and elderly care makes it possible to work instead of taking care of elderly parents. The school system makes it possible to work instead of staying home with the kids. Intergovernmental agreements and rules makes it possible to trade all over the world with less or no fear of being screwed over. My point is, society creates growth. Its a system where each sector has its part. We need the public sector, the democratic institutions also to point the direction because businesses in themselves don't care where society goes. They care about profit as it should be. Someone else have to care about climate, justice, personal integrity etc. Thanks for the video about debt. I completely agree with it and it's nice to hear someone say this.
A very balance reply to private sector being the engine . Public sector is an important team member albeit in my view Private sector plays a more important role by putting its own money on the table and taking the risk
I agree, entirely with that the carrying cost is what matters.
However, consider the following:
1) your chart is slightly outdated. Past 12 month interest on debt now stands at 852 Billion which brings it over 3.2% of GDP already.
2) due to all bond yields still rising and having held the 4% level for a while now it is near certain that the yearly interest payments will keep rising as maturing low yield bonds get rolled over into new high yield bonds.
3) IF bond markets would stay where they are, all debt would need to be rolled over into either 10 or 30 year 4.1% yielding bonds or 1 year 5.5% yielding bonds (or smth in between). As debt to GDP stands at 130% (and rising), that means that your graph is destined to set new record highs (yield * debt-to-gdp-ratio, i.e. ~4.5*1.3 = ~5.9) if bond yields stay at current values.
Bond yields must go lower long term, they absolutely cannot be allowed to break out higher. If they do, it could trigger a vicious circle where the interest on the debt is not remotely serviceable and thus balloons the debt leading to more interest due on the debt.
I would like to hear from you when you would start to say that the US cannot afford it's debt, what metric, what figure would really make you worry about the debt?
The debt we can easily afford? You mean the same debt that Yellen was saying we would default on if we didn’t raise the debt ceiling? Meaning we literally had to raise more debt to service our current debt..
Fisher makes clear in this video he has great faith in the monetary policies of the US government & the FED. However, in another video he concludes the government people and the FED people don't understand anything about "the real world". That's also interesting, to put it mildly.
thank you for your videos
Thank you, for your clear, concise and reassuring words. It’s nice to have a legend in the financial field explain this in common every day terms.
Thumbs up 👍 Ken
Wow, I learn something new. Thank you for your teaching
Thank you.
Keep on educating - love these videos
No. They're both important.
excellent
Thanks Ken!
It is a great book. Cool cover as well. Fast answers, quickly consumed..but I refer to it often.
Thanks for yet another informative and insightful video. I would like to ask a question, if I may, about the price of shares compared to earnings. Currently there are a lot of articles stating that the ratio is way to high and that this will lead to a crash in shares, because they believe that future earnings expectations won't materialize, especially for some of the tech stocks. Is this something to worry about? Thank you.
Why contrast debt to GDP, vs debt to income (tax revenue)? Its more like household debt to income- relevant. Yes, debt service carry matters most with respect to affordability, but relative to income, not GDP. Right?
I agree that spending is the problem, but the debt is far greater than was needed in the last decade due to overspending on non-productive priorities. I think you would agree both are serious problems now.
Hidden gem channel! 💎
As you indicate, it is all about looking at the correct net figures, and taking a view on historic proportionality.
Fisher makes clear in this video he has great faith in the monetary policies of the US government & the FED. However, in another video he concludes the government people and the FED people don't understand anything about "the real world".
Good talk Ken, are your numbers correct? I am referring to the views for this video, 2066 have viewed this video.
😃thanks
All true but a little misleading. That flat-ish line of debt service to GDP was in a consistently decreasing interest rate environment. That does increase the risk that it becomes a problem if rates increase, as they have. Don't ski to the puck, ski to where the puck will be.
Interesting
✝️✝️✝️
"The private sector creates growth." Yes that's true, but also not the whole truth. The private sector wouldn't create any growth if the public didn't create the foundations. And its the public sectors goals that drives the growth. The connection between East and west USA, public funding and missikn. The space programme, public funding and mission. The internet, publci funding ans mission. Basicallt all the technology we have today is the result, in its essence, of publicly funded research and investments. The workforce that drives the growth of companies have been educated by the public and private sector. In many other countries it would have been only the public sector but the US is different in that aspect. The healthcare and elderly care makes it possible to work instead of taking care of elderly parents. The school system makes it possible to work instead of staying home with the kids. Intergovernmental agreements and rules makes it possible to trade all over the world with less or no fear of being screwed over. My point is, society creates growth. Its a system where each sector has its part. We need the public sector, the democratic institutions also to point the direction because businesses in themselves don't care where society goes. They care about profit as it should be. Someone else have to care about climate, justice, personal integrity etc.
Thanks for the video about debt. I completely agree with it and it's nice to hear someone say this.
A very balance reply to private sector being the engine . Public sector is an important team member albeit in my view Private sector plays a more important role by putting its own money on the table and taking the risk