The US Debt Situation Explained
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- Опубликовано: 2 мар 2023
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If you’d like to learn more about the US debt ceiling specifically, check out this excellent video by @PBoyle: • The US Hits Its Debt C...
A big thank you to @MoneyMacro for helping with this video!
With news of the US debt ceiling standoff, I wanted to take the opportunity to discuss the larger story around the federal government's burgeoning debt load, and whether it spells danger for the American economy.
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This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).
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i fully support the usa defaulting on its debt. if its broken and you keep on putting glue/tape on it sooner or later it will break breaking it sooner than later is better.
Why didn't u talk China already reduced it's US debts holding from 1.3 Trillions to 800 Billions and keep offloading it?
31 trillion my butt, Kissinger/pentagon steals that over the weekend :P
Why do you believe a government that makes it's own money can go broke in the currency it makes? Also why do you still believe our taxes pay for government operations when Covid proved we don't tax or issue bonds to spend. If we want to spend money we do and don't raise taxes or sell bonds to do it.
US National debt is nothing but an accounting record of all the dollars the US Federal govt has spent since inception, which is has yet to tax back and sits in our economy as our savings. It is not debt at all, its part of our money supply and there is no problem with it other than the distribution of those dollars.
Its not something our grandchildren will have to pay back.
Its not a burden on our children.
The Fed govt can make any amount of payments it wants to and does not spend peoples taxes. The difference between spending and taxes is the deficit, which necessarily equals our SAVINGS.
It's almost like there is a large cohort of aging people who have no issue borrowing against their children's future.
It's much more than that... It's kind of cyclical imo with a little bit of external influence
Yeah we need to get rid of the old people, because young people are great with credit. 🤣
Nah... let's JAPAN PAY FOR IT
After all, we're freely handing them a world that is already been built. They will do the same for their offspring. This is how life works.
We're borrowing against our children's futures in more ways than just our national debt. We're building unsustainable infrastructure systems that they won't be able to afford to maintain, and we're polluting the environment for them to either pay to clean up or live with the health consequences of.
Italian here. We, too, had a period - 1980s - where our debt exploded until the markets were worried we would default. We didn't default - that's good. Our economy remained stagnant for decades, because taxes couldn't be lowered while our government could hardly afford any kind of stimulus - that's bad. Also, we are vulnerable more than ever to pressure from financial markets. And the chances of going back to a manageable debt are close to zero, which means lifelong state slavery to debt owners. So, no, you don't want to be in our situation even if "we are still not going to default". Just saying.....
It is a bit different because the US can print the currency it owes its debt unlike Italy.
I think you guys are still in this period tbh
Amerikkka is spoiled...hence it's printing press goes nonstop cos the is enslaved by the $ cos world runs on it atleast and indefinitely will see till other credible baskets come to bear
us will just print more $$$
"Taxes couldn't be lowered" yet they were lowered, for the most wealthy People and thé biggest international compagnies how evade happily Taxes.
Richard is blinded by the economic doxa. A sovereign state is not à compagny. A state could decide to tax 20% of any wealth above a certain threshold. It has been done in the past (France, 1946-1949). Abstate could also tax at an exorbitant rate above a certain pay grade : USA under eisenhower had a 97% marginal tax rate.
It never ceases to baffle me that approving borrowing is a separate process from approving the budget. The budget has implied borrowing in it, why would any sensible system not also authorize the government to borrow as specified in the budget?
It’s simply so they can have this fight every year. Just like china’s most favored nation status back in the 2000s. It’s non debatable but it was brought up to debate regardless.
Because automatically writing yourself a blank check is not actually responsible. The whole point is to place a constraint where the people spending the money have to actually explain why it has to be borrowed rather than the country working off existing tax revenue.
@@defenstrator4660 so its simple, any time we have to pass a bill that increases government spending, pass a debt ceiling increase to compensate. you are already showing where the money is going, its going to this new spending venture.
@@ShadowAraun Yeah, that’s missing the point. The reason the debt ceiling is there is to try and stop spending money you don’t have. Unless it is some sort of future benefit borrowing is simply stealing the money of those in the future to spend in the present. You get the stuff, they get the debt. The idea is that if you should not be able to simply borrow and tax. That there must be some fiscal responsibility to live within your means. It can be done. During the 90s both Canada and the US had balanced budgets. So why people treat it as an alien concept is beyond me,
@@defenstrator4660 the idea of raising the ceiling being tied to bills that increase spending is EXACTLY to limit the bills that increase spending. so we can stop spending money we don't have.
Thank you for another great video mate. I enjoyed every second. Please keep it coming.
US Debt - let’s see how far we can stretch our reserve currency privileges before it breaks
Let's cut out the engines of the plane in order to see what happens
"What happens to those nations that run out of cash either one goes commie or ones goes fash. Million dollars for a loaf of bread can't wait to bash my neighbors head print money. "
Remember this song?
I find it unnerving that Warren, Sanders, and AOC claim that having a reserve currency means we can spend infinitely without consequences,
_and people believe them._
@@badluck5647 Hey hey hey, not every politician has the time to read history okay? Pandering to political extremism is very time consuming I’ll have you know!
@@NormalPerson053 Not necessarily, the UK lost its reserve status and have managed fine (until it decided to shoot itself in the foot). But yeah that’s a gamble best left not taken…
Love these videos. Loving this editing too.
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?
@theplainbagel great video! I was wondering if you could cause continue along the lines of this topic and discuss the impacts of another world currency.
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?
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.
The thumbnail for this is probably the best to describe the video and how he feels about the debt ceiling
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
Hey Richard… would you consider doing a segment on Stephanie Kelton’s book (The Deficit Myth)?
I find her argument quite compelling.
Cheers
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.
Super informative and didactic as usual, you are such a great lecturer. Any thought about becoming a professor?
would be great to see the analysis of the Chinese state debt. Great video! Thank you!
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
A much-needed video
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.
Wow, i've seen a lot of recommendation about Juliann Hart, is she really that good?
How do I connect with Juliann Hart?
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
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
"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
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
Very informative!
I think it'd be interesting to hear this analysis again with updated information from this year.
Well done.
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
Nice work! Thank you
Good one here Mate!
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.
@@Krevvs The government HAVE to reduce spending and raise taxes. You can't continue kicking the can down the road.
@@Krevvs Nah. This bullshit is present and common with the entire political sphere in the US.
@@Krevvs 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
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 😈
7:45 my pattern seeking brain heard the word “safe haven asset” and my thumbs automatically moved to skip 40 seconds past the impending masterworks ad before I remembered what channel I was watching
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
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.
Wow, that was really well said
That was awesome…thank you
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
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.
What happens to bond holders after the 'x date' (ie. the last day the us government has to make a decision on what it's going to do about the debt ceiling)?
What happens if the US does default (a technical default, not a actual default)?
What happens if the US's credit rating gets down graded (again)?
*i've done a lot of reading on this... the best answer i can find is that 'the treasury would stop paying interest'.. Great, but what happens to my principle (ie, the money i used to buy the bond in the first place), does it just sit locked away until maturity (accruing 0% interest), or would the Treasury 'take' the principle and i'd never see my money again?
IDK...
Great vid!!
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.
Keep them coming sir. I love your videos. A trained professional educating the public, it doesn't get any better.
I really appreciate that your content model isn't panic for clicks.
Excellent video!
😅 Thank you for the more literal thumbnail. Kept thinking about Patrick's video where he used dollar bills to make the point, but might have been counter-intuitive.
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.
I love your videos, and this one is also very good in general, but I wish you had talked about the fact the Fed can always reduce the outstanding debt load by purchasing as much of the debt as is needed. Since all interest payments the Fed receives are returned to the Treasury, this is effectively the same as retiring that portion of the debt. The trade off being that Fed purchases of treasuries will (all things equal) lower the interest rate, which may conflict with their stated goals… but it doesn’t change the fact that the US debt, in itself, is never an inescapable burden.
Although it’s less accepted, it would also have been good to see you mention that many economists reject the idea that treasuries represent the government borrowing money in the first place, but are simply functioning to reduce the liquid hard money supply (as evidenced by the justification for war bonds in the past).
The most interesting part on 10:11 is how the numbers change from right to left.
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
would love to see a video about Argentina's debt crisis as well!!
Fuck Argentina
thanks
Nice video!
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.
you didn’t tell me to stay safe out there! what am i supposed to do now?!
As a follow up I would love to see your thoughts on how income has correlated with spending to result in our deficit for the past 20 years or so
Would love to see your take on the recent US bank crashes - Silvergate and SVB.
Good news! Check out his latest video.
Failure to raise the debt limit is very similar to returning to the Gold Standard- it's simple and can be stated in a single sentence, but in the context of an entire economy is just a complete self-own that does nothing but make the country and most people poorer. Greece defaulted because it _couldn't_ pay; the US defaulting would be nothing but a _choice,_ effectively punishing society for the crime of functioning (such as it does). And all to make life harder for old people and poor people.
Borrowing against the future without regard will make the punishment worse in the end
the entire monetary system is a scam meant to enrich those that have direct access to the money printer
A debt limit is good in theory but in practice it’s just a tool of political bickering
Road to a 100 trillion
Under a Gold Standard we'd not have a "debt limit crisis" since you cannot, with gold, manufacture money out of thin air, as you can with fiat money. Unless you believe in "money non-neutrality" (a fancy way of saying, short term, you can grow an economy by printing money, a bogus concept espoused by both free-marketeer Milton Friedman as well as his nemesis, socialist John M. Keynes), then fiat money is the reason we have a crisis now.
Oh noes those poor old people who got in that situation through nothing but their own stupidty. They set up the sytem in the first place, let them face the consequences. If they really are good people their children will likely remember. Otherwise what makes them so special? Let them eat scraps like everybody else.
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
There's an advert on this video which is offering a scheme exactly like those you have warned us of in the past. "You may doubt my strategy.. so lets take this one individual case where it's been successful as an example"......
Thank you.
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
Please keep the charts/graphs up longer. It’s hard to pause in time to absorb the info.
The average maturity of the debt is about 5 years so current interest payments still mostly reflect the previous super low rates. Right now expiring debt is being refinanced at 4-5% interest rate, if current rates stay for a few years interest on just the current debt will be around 1.5 Trillion. About Twice what is being spent on defense !
The U.S was running a Trillion dollar deficit during "the good times" before COVID when it should have been paying down the debt. Now it is at 1.5 Trillion, recession is knocking on the door and there is nothing left to fight it with.
Great video
And Treasury Bonds are payed out in a Currency that the Bond Issuer (US Government) has a monopoly on the creation of.
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. 😂
Thank you very much...
The US run 23 consecutive years of budget deficits. Nobody is debating fiscal responsibility or can a plan of debt reduction found anywhere. 2023 single year debt service is over 1.2T$ more than military expenses if you like, or 2.5 times the dollar value of it gold reserve. Persistant deficits does not empire make. Note that trade and current accounts were also in deficit for the same 23 years. Nobody (important) seems to worry about it.
Great video dude!
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
11 months passed a little over 34.2 trillion dollars now
The “largest” economy that is dominated by the service industry. That sure is reassuring. But the Hopi um is much appreciated.
If you notice the chart at 1:52, our debt remained very stable at around $3 trillion from the period after WWII until 1982. During this period, we taxed corporations and the wealthy at a very high rate with significant deductions and loopholes for investing back into our economy. Our middle class was at its peak at around 65% of the population, we had labor unions, the stock market rallied, we fought a war in Korea and Vietnam, and put mankind on the moon.
Beginning with Reaganomics around 1982, we offered large tax cuts to corporations and the wealthy, and our debt grew almost every year since. Since then, our middle class shrank, wages no longer kept pace with productivity (stagnated), our mother's entered the workforce to keep up, our savings went negative, and our personal consumer debt grew (in part funding China's growth). At the same time our production went abroad, and the wealth gap has increased.
The majority of our national debt today is owned by Americans with only $6 trillion owed to other countries, including a little over $1 trillion each to China and Japan. Much of our debt is in private and public retirement accounts, social security and Medicare, state and local governments, and our financial system to include the Federal Reserve and support for the dollar as a global reserve currency. Our debt is a measure of our economic wealth and power.
Bottom up works and top down doesn’t? It’s almost like literally everyone knows this but everyone that can make changes are benefiting from the current system so they refuse to make any changes.
@@rttrttyan I believe you're right about people benefitting from top down lobbying and campaign contributions.
In my view, it's not so much top down doesn't work. It does. Milton Freidman's "greed is good" laisses faire (Reagan) economics simply goes to where the returns are as a matter of self interest. People keep more of their money to spend it as they see fit. Like big tech rather than rural brick and mortar rural small businesses - once the backbone of the US economy and our consuming middle class nuclear family.
The government spends bottom up where financial returns do not matter as much. Infrastructure, for example, is less about financial return to the government and more about returns in economic growth, the public good, and creating jobs. We avoided the near certain recession (I think the inverted yield curve was more about lower inflation expectations than a recession indicator).
I argue the Obama's "supply side" recovery from the 2008 financial crisis was (politically) sluggish (for a 1 term president) because returns were found in emerging markets abroad and fracking in the US - generally speaking. Both benefitted from a zero interest rate policy. The post lockdown recovery was more rapid because US consumers had stimulus money to support opening of shuttered US businesses.
@@RoobieRhoo 1 term president? Also any recovery from the financial crisis that Obama did, Trump wiped away with his 1 term.
@@rttrttyan I'm sorry for not being clear. I was paraphrasing Mitch McConnell who promised to make Obama, "a 1 term president." I think this was part of the motivation for not providing sufficient stimulus to main street in order to ruin his presidency. Meanwhile a lot of people were out of work, lost their homes, and could not retire. This actually began the populist movements in America, including the Occupy Wall Street, Tea Party, and MAGA.
It took nearly 5 years for unemployment to come down to around 5% when the Fed began to tighten the money supply in 2013. By the time Trump took office the unemployment rate had fallen to around 4.5%. Trump and his supporters were so proud of "his" economy. In fact, it was primarily driven, and necessarily overblown (quantitative easing), by the Fed during Obama's term just to get inflation grudgingly up to 2%. This was painful trickle down economics in action.
Don't forget about the insane amounts of debts that the decades long war on terror brought us. Before that we had almost no debt. I know there are many factors but that's a huge one.
“War on false terror” to be exact, we didn’t belong there
Alarmists gonna alarm. Good thing we have Richard to keep things nuanced!
Thank you
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.
Before 2008 crisis, the market believed that the housing market would never crash.....
Nothing is forever
😂 Every video in this channel: “Nothing is going to change; keep on indexing”
Good one
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.
As a German it seems insane that some of our own politicians want to get rid of the "Schuldenbremse" (debt brake) especially if you consider what debt does to other countries.
We have have a pretty reasonable amount of debt and I really hope it stays this way.
Great video!
German politicians also want to ride on the coattails of the US military paying for the defense of Germany...ostensibly because of the German constitution or some-such. Really the USA should pull their bases out of Germany if the Germans don't start paying more for their defense.
That bill is a leftover of the financial crisis 2008 and is an obstacle nowadays to retain wealth in Germany.
@@raylopez99 Germany wants know to spend more on its defence, because its necessary, but since we did not invade Iraq or Afghanistan we did not need it in the past.
There is no law that prohibits Germany from spending more, so you are wrong about the constitution.
Germany is a currency user, not an issuer, so they have extra incentive to mind debt. They can not approach the situation in nearly the same way as the US.
Debt does bad things to countries who take it in foreign currencies. If you're debt is in your own currency, then it cannot hurt you
This is such an exhausted topic
To be fair, most of the people posting it are not licensed to give financial advise like Richard
That thumbnail is so funny and so fitting 😂😂
The problem with the US government's attitude to debt isn't that a crisis or collapse or default is looming, it's that they have come to rely on being protected by transient features of the economy.
* We can keep borrowing more because GDP goes up (until it doesn't)
* The dollar being the world's reserve currency depresses inflation (The pound used to have this position, look at the UK now)
* The markets don't see a problem yet (but once they do, the spiral will have started and it will be too late to prepare)
These are bad habits that need to be addressed before, not after things start going badly.
The fed has ironclad control of our interest rates, so they will always make sure interest payments fall below the growth of our economy. I wouldn't say our reserve currency status has any bearing on inflation. What do you mean look at the UK now? You make it seem like they defaulted and are currently dealing with hyper inflation. They're fine
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.
Great vid ty
Risk free return rate of Bonds is just like AAA rating on MBS in 2009.
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
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.
Thanks
Look at Stephanie Kelton’s work on modern monetary theory
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.
I liked before I started watching. That's the level of confidence I have in you to explain this right.
Do you also slob on a knob then ask them their name?
Maybe it's just because I'm young, but this all seems NEEDLESSLY complicated. Too many variables and stats to something that's too simple.
Thinking about it as a common citizen, if I don't repay my debts, people come 'A-knockin'. Assets get repossessed, wages garnished, etc. When citizens don't pay the fed, it's a problem. But when the government don't pay.. ??
Why is there little to no reparcussions for governments? They mismanage their money but the people of that country are penalized for it?
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
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?
The US debt situation is quite alarming, with the federal government reaching its debt ceiling of 31.46 trillion US dollars. While the government has been using extraordinary measures to prevent a total shutdown, if the situation is not resolved by July to September, the US could default on its debt, which would be catastrophic for the economy. The political discourse seems to be causing the issue rather than fiscal demise, as the debt ceiling can be hiked at any time. However, the fact that the government keeps needing to push this debt ceiling higher and higher is a real problem. The US is far from a Greece or Sri Lanka-like outcome, even with a massive debt pile. The funding for government costs comes primarily from taxes, with the single largest source being individual income tax. Whenever the government spends more than it earns in a given year, it needs to borrow the difference through the issuance or sale of Treasury bonds. Total debt isn't a good gauge of a country's solvency, as the size of a country matters, too, which is why economists often look more toward a country's debt to GDP when gauging a country's debt burden. Unfortunately, this measure isn't doing well either, with the US at 124, which is the highest level it's been since the end of the Second World War. While the US has seen a jump in debt every time it experienced a severe economic shock, it's crucial to note that a growing debt balance may not be all that concerning if a country's size is keeping pace regarding its economic output.
The US debt situation is concerning. The US has been spending more than it earns every year since 2001, and this trend isn't sustainable. While the debt ceiling can be hiked at any time, political discourse seems to be causing the issue, which is a significant concern. It's crucial to note that the US is still far from a Greece or Sri Lanka-like outcome, even with a massive debt pile. However, the US's debt to GDP measure is currently the highest level it's been since the end of the Second World War, which is alarming. It's essential to monitor this situation closely as a country's size matters too, and the US's economic output must keep pace with its growing debt balance.
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.
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