Public Debt: how much is too much?

[@lailaalfaddil7389]

This is financial advice and I never give financial advice: DONT LEAVE DURING THE BEAR. If you don’t want to invest…learn. If you don’t want to learn…build. If you don’t want to build observe. DO SOMETHING…other than leave. There is so much opportunity here. Take advantage!

[@susannnico]

Just because there are opportunities in the market doesn’t mean you should go in blindly. To understand the potential factors that contribute to your financial growth, I'll advise you to seek the help of a professional.

[@lailaalfaddil7389]

Very true, I started investing before the pandemic and that same year I pulled a profit of about $750k with no prior investing experience, basically all I was doing was seeking guidance from *ROCHELLE DUNGCA-SCHREIBER* who's a guru in the game, you can be passively involved with the aid of a professional.

[@kybed]

how much wealth a person has to have to say it is enough? if you have more than enough to last you in your lifetime, just take no more than what is necessary.. resources in the world is limited.. money gained by someone is money lost by someone, investment bankers may be smarter but they are not necessarily moral or ethical.. investment bankers getting paid more than public educators, health workers, is the real tragedy.. people want to get richer and richer by whatever 'legal' means necessary..

[@bb344]

Strange the elephant in the room, the central banks, are never addressed. When speaking on interest rates, the artificial lowering created by CBs is also never mentioned.

[@Mark-Hall]

Exactly. Investors aren't buying these bonds, central banks are. This should be what The Economist is discussing.. It's synthetic MMT.

[@sunmarin6873]

Mark Hall Monetarist gang, rise up.

[@dnyalslg]

Well, central banks do set interest rates but in response to the economic environment. They don't set the rates and then the economy follows, but rather the economy sets the rhythm at which central banks will place their rates. However, to your point, central banks do have control as to how much they will change the rates, but overall it is the larger economy what defines the interest rates.

[@todornedyalkov5510]

Central banks influence the Benchmark (Risk-free) Interest rates,which is not the entirety of it.If people stop believing each other (Creditors to Debtors), the spreads will sky-rocket and the show is over.

[@todornedyalkov5510]

@@dnyalslg Absolutely.

[@QuestionEverythingButWHY]

“Politicians and diapers must be changed often, and for the same reason.” ― Mark Twain

[@johnl.7754]

Question Everything - Thought Provoking Ideas too bad the wizard behind the curtain is controlling both parties.

[@HadrienLBB]

This could be a Tom Blair quote, but not a Mark Twain's one since he never said that. Also, this is unfortunately a bad analogy. Diapers need to be changed because they get pooped in. They are victim of somebody/something else. In other words, they are not responsible. I doubt this is what this analogy is trying to say about politicians...

[@beepboopbeepp]

who is this guy, and why do i see his quotes everywhere so often now, is this a new guy to replace orwell by quoting this guy instead?

[@seanthe100]

Iike chairman Xi

[@JohnnyMando92]

@Feri Simalakama they need to be changed often, otherwise their stench will spread.

[@TheStubertos]

"Economists have no idea why interest rates are so low..." Uuuuhhh that little thing they've been doing for the last decade called Quantitative Easing maybe?

[@StupidBadyXD]

I think economists are thinking from a point of view of a natural order of things. No one will lend out with 0% Interest. When government stepped in, it all crumbles.

[@melbourneopera]

Does slower debt interest rate mean slower bankrupcy?

[@gusjackson3658]

That’s the bit that I don’t understand. QE should increase inflation.

[@johncoffey1483]

Gus Jackson QE can push inflation up while supporting interest rates being low. The central bank prints money and buys government bonds at low interest rates giving the money to the government. In the UK the government doesn’t make any interest payments at all to the Bank of England on the government bonds the Bank of England holds( About a third of all “debt”). Lots of the “increasing debt” doesn’t really exist. It’s just printed money and not real debt at all.

[@SimplifiedFinanceSiFi]

yeah seems they forgot about that age old thing called supply and demand

[@sycon3655]

If your money becomes worthless, your debt becomes worthless.

[@deego237]

Yesn't

[@SanitysEdg3]

Thats the goal of inflation

[@rickvandam3238]

Is that a quote from Germany and WWII Edit ww1

[@inam101]

Yes, but in the meantime, keep paying interest. And when that happens, you will be long gone. :D

[@irishpicker7295]

50 grand for every man woman and child. Anyone willing to pay their share tomorrow?

[@economicsinaction]

"The UK Public debt is high: PANICCCC" Japan: *"Amateurs"*

[@tablechums4627]

Amacur

[@netijhen]

South korean : hold my suicide rate

[@justinwalpole8956]

Frances debt is higher I think

[@skiran69]

Well.. Japan owns a lot more foreign assets than debt. So it isn't big of an issue. Infact, Japan is the largest creditor nation in the world.

[@compilerdefiler3995]

The only reason it works in Japan is because it's only in Japan and not worldwide. If all countries become like Japan then we are in deep shi

[@mike-coles]

Public borrowing is predicated on future growth. The notion that economic growth will continue with certainty, forever is naive. We’re basically living beyond our means and expecting our children to pick up the tab.

[@edwardlewis1963]

"Public borrowing" is a euphemism for Government Borrowing on behalf of the public. That's a pretty interesting ability: the ability to borrow on behalf of somebody else.

[@alioshax7797]

@@edwardlewis1963 The government job is to do basically everything on behalf of somebody else. When they build a school and pay your pensions, they are also paying for someone else.

[@terrythompson7535]

No, the central banks are living above their means by "loaning" money that they create out of thin air, and collecting taxes on it. It isn't the public's fault that a redistribution of wealth from the poor and middle class to the rich happened through the counterfeiting of money.

[@Kawasakifreak1]

Notice the same assumption by Mr Avert @ 1.26 - 1.28 ' to keep the economy on track' - as if economic growth is an inevitable product of central planning by the authorities..

[@mike-coles]

I fear that the current levels of borrowing “to keep the economy on track” just creates a hamster wheel of countries requiring growth from their citizens to service the debt. Inflation, population growth or economic growth are not certain.

[@budawang77]

This video proves how hopelessly deficient mainstream economics is. No mention of central banks and QE?

[@krpkrp3033]

If you want to know how to move forward in the economy, don't ask an economist. If you want to know what happend in the past ask an economist. Economists use economic modeling to forcast ahead, but there are to many unknown variables to make them work and there called "people", we are all to different in thought and actions to be perdictable.

[@henrygustav7948]

Mainstream econ is definitely hopeless which is why people are moving to the MMT macroeconomics position to understand what is going on.

[@_Iscream]

They’re not classical economists

[@Ash-pe9ib]

Or that the financial system started to collapse in September of 2019.

[@elcapitalista007]

What's wrong with QE? Why did QE not cause hyperinflation? Why would QE cause hyperinflation? The supply of money hasn’t increased. There was no printing press. QE was an asset swap. Longer duration bonds were exchanged for shorter duration reserves. If anything, the velocity of money had decreased through the financial crisis. There was no robust intrinsic demand for money because of the lack of investment and consumption, and inflation is generally much more of a demand side story than a supply side story. Every country on the planet was engaged in their own QE at the same time, so there was no relative currency debasement either. If anything, there was a safe asset shortage through the crisis. Investors wanted safe assets. What’s the largest and most liquid safe asset? US Treasuries. And what do you need to buy US Treasuries? US DOLLARS.

[@klank67]

The world has a history of debt forgiveness. We've been borrowing 'happiness from tomorrow' for centuries. You leverage it until its worthless!

[@theworddoner]

May I introduce you to r/wallstreetbets?

[@thelouster5815]

平田ぺえ Sir this is an economics channel.

[@theworddoner]

@@thelouster5815 no sir... this is a casino.

[@dr.lyleevans6915]

The Louster report him for spam. I’ve seen it like 5 times

[@Gurci28]

0:17

[@davidk.8342]

Federal Reserve :Nah its ok just print more money Weimar Germany: oh really...

[@afgor1088]

real economists: "well it's a bit more complicated than your econ 101 textbook told you it was"

[@mikasa3427]

Governments can only print money to pay off debts in their own currency. Weimar's debts were denominated in foreign currency so their problem was they couldn't just print more French Francs to pay it off.

[@afgor1088]

@@mikasa3427 well ... They could but France probably wouldn't thank them for it

[@DwightAcorda]

🤣

[@preshittendulkar5259]

Post war Hungary , Zimbabwe, Venezuela disagree

[@salokin3087]

Basic macroeconomic knowledge like this should be mandatory in schools

[@BilgeKarga1]

Government don't want you to know about economics.

[@mawavoy]

Salokin , it is is some locals.

[@somecuriosities]

@@BilgeKarga1 Unless its neoliberal economic theory that agrees with and justifies the absurdities of their own economic policies.

[@xuimod]

Why? Not even Noble prize winning economists can figure out something as like why bond rates are so low. This video was just about a whole lot of nothing.

[@jonathandennis7]

xuimod dumb question. The fed keeps buying em to keep then low. If they don’t, interests rates go nuts economy (markets)crash. I’ll take my Nobel prize thanks.

[@EddyMercury33]

The Central banks such as the Fed and the ECB are the ones responsible for low interest rates and they will keep them low as long as governments need them to be. They can afford this because there is no inflation in the price of consumption goods. But this is at the expense of individual savers that get almost 0 return on their savings account. Besides, this money printing is feeding a bubble in the price of assets such as stocks and real estate which benefits wealthy people in the end.

[@richdobbs6595]

There is no inflation is some goods that would otherwise be deflating. But in the USA there is significant inflation in housing, education, medical care, and better quality meat and vegetables. But these don't show up in the CPI for various reasons.

[@zekevfab]

Although the Fed has an influence on the rates, it is the market that sets it at the end of the day. The US debt is almost at $27T while the Fed owns about $4T of US treasury bonds (around 15%) and about $6T (22%) is intra governmental debt owned mostly by social security. The remaining 63% of US debt is owned by the public, almost half foreign. So if the market loses confidence in the US economy for some reason, the Fed with its 15% holding will not be able to prevent a rise in interest rates. So why investors have been pouring into the US treasuries for the past 40 years?

[@grzegorzjuchniewicz7158]

@@zekevfab Better check who has been the biggest buyer recently of US Treasuries knowing it will lose money on it ? Who has such deep pockets and don't care about ROI ? Once you will find out your jaw will drop, I guarantee !

[@zekevfab]

Grzegorz Juchniewicz the Fed has been the biggest buyer since 2008 through successive QE. What did you want to say about that?

[@grzegorzjuchniewicz7158]

@@zekevfab Well, that's not entirely accurate. You have to research "secret system of finance" in order to answer the original question. By the way the money never ended up in official economic circle !

[@user-tz5uq2bt1s]

If you don't let bad companies fail, they never go through bankruptcy proceedings and restructure. It's very important to let the economy fall from time to time so it can restructure.

[@Philitron128]

How often is that?

[@phuocluong7974]

@@Philitron128 short economic cycle is current around 8-12 years. Long economic cycles is every 4 short business cycles or so, so about 50 years. The last time the global economy went through true debt restructure was around 1980.

[@JoeGebauer]

@@phuocluong7974 Exactly. You sound like Ray Dalio!

[@beaverbridge]

Video: "We don't know why interest rates are low." Government Central Banks: "Our official policy is to print money to achieve these low interest rate targets."

[@jeff9846]

you know governments/central banks choose what the interest rate right🤦‍♂️

[@ancapistan]

@@jeff9846 the fed reserve chooses the target rate but the interest rate is a market rate based on the availability of money in the form of bonds, stocks, notes, etc. essentially, the reserve is where the accounts that banks lend to each other through FRB are cleared. that also means that printing money doesnt necessarily put it into the economy if we're in a situation like a liquidity trap where people prefer to hold onto dollars than to incorporate it into the circuit of investment due to insecurity, hence why having private banks with total autonomy over the money supply is a bad idea

[@nachannachle2706]

Then they wonder why there is no inflation. Duh.

[@xxczerxx]

@@ancapistan Printing money (QE, reserve creation, asset purchases... Whatever you want to call it) doesn't get into the economy, period. The sole beneficiary is literally the person/institution whom the bond was bought from. It is private banks that create new money, when they make new loans . That's where 98% of money in the economy comes from.... they're just new deposits created literally from thin air when the bank makes a loan. Now, QE can HELP those same banks to make new loans/new money, because a central bank can buy toxic assets like non-performing loans and other dogshit off the balance sheet, which means private banks will take a bit more risk on by issuing new loans...but central banks haven't. They've just bought shitloads of government and corporate bonds, which doesn't really help anything. You are right though -- the fact it's just private banks that have the power to do this is crazy when you think about it, it's like they all have a collective magic wand.

[@ac1dP1nk]

@@ancapistan greed and arrogance define speculation it is predictable we can police investor's economic behaviour they are no different from any other group but we have to be serious and that means an international agreement or at least reckoning over capital controls a narrow oligopoly in the private sector dictates the terms of globalisation to everyone else even subverting democratic sovereignty. it is the modern equivalent of the colossal marauding joint stock companies of the empire

[@folk.]

Mark my words: INTEREST RATES WILL NEVER RISE AGAIN

[@chrism3933]

And if they do, it'll be temporary and for show.

[@csanton3946]

Yes because we have so much excess funds that is being owned only by the few that even a risky government with high debt gets to have low or negative yields

[@AP-yx1mm]

Technically it could, if the poor people of the world, became more rich and had a higher demand, but that's impossible...

[@AntonFetzer]

Why will they not rise again and why are they low in the first place?

[@AP-yx1mm]

@@AntonFetzer There is probably not one reason for that. You can find many from the monetary policy being more decoupled from the politics, to these monetary policies being put forward to favor the retired people who are ever growing in number. But similarly if all these main spenders go into retirement there will be less consumption. In general there is a problem of endogeneity (chicken or egg), and also what is called "fallacy of symmetry". Basically, if A causes B, you would try to reduce A to have less B, but B can be sustained, by C or/and D... and so on. It is not so easy to find a clear cut answer...

[@ІгорБеленко]

The best thing that should be on everyone mind currently should be to invest in different stream of income that doesn't depend on government especially at this time of this pandemic.

[@aidenjaxon6505]

I think the pandemic has taught people the importance of multiple stream of income, unfortunately having a job doesn't mean financial freedom or security.

[@aidenjaxon6505]

As the economy is shifting, you need to have legitimate and creative sources of extra income. There are opportunities available that people have been using for years now”

[@elvirajohansson6136]

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[@elvirajohansson6136]

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[@victoriawong1287]

@@elvirajohansson6136 The zeal to start forex investment is really eating me up but I just don't know how to start earning for it🙁

[@liyexiang666]

oh, i know how rates has gone wildly low when central banks keep pushing short term rates down, when they keep buying further alone the curve, and when they go down and buy junk bonds. Of course, we do

[@jamesedward6424]

Nobody's buying bonds the only person buying bonds is the central bank

[@vanillaglue]

Where does the ride stop?

[@krpkrp3033]

Yes, buying each others debt, is exactly the same as the housing crisis of 2008, it's going to pop sum day.

[@johncoffey1483]

I really hope so. When the central bank buys the bonds using printed money, to transfer the printed money to the government then there’s no interest to pay and the government gets all the cash. I wasn’t happy during the 2008 crisis onwards when the UK government announced it would be doing bond buying on a certain date. Prior to that banks, bought bonds knowing they would definitely be able to sell them back to the government/ Bank of England at a guaranteed profit. So the printed money was being split between the uk government and banks.

[@xxczerxx]

@@johncoffey1483 In the UK, does the principal even get paid back? Isn't that literally debt financing?

[@johncoffey1483]

@@xxczerxx The UK government owes the debt to the bank of England but it wholly owns the bank of England. The UK government could pay off the bonds when they mature and then just ask the bank of England to pay the money back to it maybe as excess profits. It could just issue new bonds to the bank of England and not have to transfer money at all. Really the debt doesn't exist. Yes it's debt financing/ money printing.

[@brocalyboy]

The idea that interest rates are a mystery is absurd. The Fed can produce as much cash to buy bonds as it wants. It can also issue as many bonds as it wants. It's an effective monopoly. It has extensive control over interest rates. Not sure why this wasn't raised in the video... Seems like a fairly critical point...

[@G8tr1522]

This is a really old-school, textbook view of bonds and debt. A large source of demand for bonds is within the commercial banking sector, used as collateral for overnight repo loans. And that very quickly progresses into a discussion of the Feds role in bond yields. That’s what they were talking about “why no one really knows why yields have been so low”. China and Japan own a lot of debt, but debt is most frequently dealt and traded between commercial banks and financial institutions. In many ways, Treasuries are used like loans and like money between banks. The details of these transactions aren’t fully public, and that’s why “we don’t know” why yields are so low.

[@Jazdude123]

Who exactly is doing the saving? It is weird hearing about how over-leveraged most Americans are with credit cards and student loans and how not enough people are saving for retirement and how most Americans couldn't afford an unexpected expense over 1K, etc but then interest rates won't go up because there is so much saved money? Is it all the millionaires and corporations who are saving when they are supposedly the ones investing the money? Or someone/thing else? It seems weird to claim that it is unknown who is doing the saving? That much money sitting around somewhere seems like something the government and other organizations would know about?

[@from0the0ashes]

Yeah, this doesn’t seem like a well done video. In the past starting a small-medium sized business may have involved taking out a big loan. Nowadays you issue a portion of your company to investors in return for capital. Whenever the bank issues a loan, new money is created (because the banks can issue more money than people have saved with them up to a multiplier). But if money is just moving around from investors to new ventures, there isn’t as much pressure on banks to issue new money and hence no pressure on interested rates. Another point which this video seemed to have got wrong is who is buying these govt bonds. While China may have bought plenty of bonds in the past, really the big player is the federal reserve. They buy the bonds and give money to the govt. In other words the us govt is simply printing this money (though you wouldn’t use a physical press anymore)

[@chrisdoyle1389]

Yeah the wealthy look like they are saving but all they do is reinvest the money to make more at the expense of the nation and hard working lower to upper middle classes.

[@joythought]

One stat is that the majority of Americans can't afford an unexpected expense over $400 so obviously have no bank savings or fungible wealth. Another stat is of the total income of citizens the amount being saved is at record highs compared to the last 30+ years. Not hard to see that it is the minority that have the capacity to either spend or save and are saving or investing now.

[@yoyu2567]

Dosnt save invest it so you actually make money instead of it just sitting there Open an investing account there are many commission free brokers that also have fractional sharing so you can invest with as little as a 1$ and it only takes 15 minutes to open an account

[@zandaroos553]

Yo Yu Investments turn in to savings eventually. Finance speak =\= Econ speak

[@QuestionEverythingButWHY]

“He knows nothing; and he thinks he knows everything. That points clearly to a political career.” ― George Bernard Shaw

[@charleshager1164]

"With low interest and high gdp growth, assuming you keep new borrowing in check, you can grow your way out of debt." Every govt in the world: "so you're saying I can borrow as much as I want?"

[@jesusaguilar1206]

Why are you leaving the part out when the us dollar was backed by gold and then removed by nixon..creating access to easy credit

[@michael1345]

That is because all Nixon did was acknowledge the truth at that time. Gold as a bench mark had become redundant.

[@rg5445]

At least everyone can now finally admit that, all “money” is based on debt. There isn’t now nor has there ever been enough money in the entire existence of money to pay back what’s owed. The only way that’s possible is to create money out of thin air and that’s exactly how it’s done folks. So, it’s never been tax and spend by governments, rather it’s has always been spend and then tax. Period.

[@GtiMuchFast]

When you can't raise interest rates over 0 or you collapse, I would say it's too much

[@cookiecola5852]

Its the oppsite tho...if some country is dependent on low interest rate, that means private sector gets essentially no interest in their loans, In other words goverment borrows with interest, leand to some private sector without interest essentially paying the interest

[@GtiMuchFast]

@@cookiecola5852 idk how you calculate it but banks want to make money and if they can't raise interest rates, its a sign that the people to whom they lended the money to are too weak to bare higher interest rates. Thus, the lower the interest rates are, the closer society is to be insolvent/having to much debt

[@cookiecola5852]

Jeremie Roy, if you go to a bank for a loan of 10k dollars and the interest rate is... 2% you will be paying 10.200 dollars back to the back cuz of the interest of 2% Its calculated by the amonth of money

[@GtiMuchFast]

@@cookiecola5852 banks will charge you as much as possible. It's how business works. The lower the interest rates, the lower your ability to pay

[@blueridding]

The disembodied arms swapping bonds really creeped me out

[@chrism3933]

Those disembodied arms belong to the Federal Reserve.

[@friedrichwilhem9631]

The rich see economic crisis as a garage sale, that’s why investing right now will be the best decision...

[@brianjena5612]

ACCURATELY SPOKEN 💯 Investing in Crypto now is very cool now especially with the current rise in the market now

[@brianjena5612]

Wow, I’m surprised someone just mentioned expert Bruce

[@brianjena5612]

Wow...Mr Bruce Walter of Financial education have really made name for himself

[@jessaroland4281]

I’m new to trading and would like to reach out to Bruce. How and where can I do this?

[@kimzhang3474]

Most people stay poor only because they got discouraged by friends and relatives who stopped them against investing and trading cryptocurrency While the wise ones kept on investing in cryptocurrency and growing higher financially

[@my_no_1_americanbulldog580]

How to be saying something and say nothing intangible. You have succeeded in keeping us in the dark

[@shaji9218]

We can calculate and deduce things from far away galaxies but we don't know why interest rate is low! Most families in the UK couldn't cover an unexpected bill of 450 £. Yet people are saving and that's why interest rate is? Retirement age keeps going up because we can't don't have enough money for people to live until they are 90, yet pension funds are loaded? There is alot of paradoxical information in the world!

[@GEMtrustNET]

Today it's not about return ON capital. Today it is about return OF capital

[@racypies]

PRIVATE FED PUBLIC DEBT what a great scam.

[@gast128]

It seems to me a dangerous strategy to rely that GDP will outgrow the interest. It will amplify recessions due to less income alone and the extra need to economize. Also some countries (e.g. Japan) will never be capable of paying off its debt due to steady GDP. Then again foreseeing 5 year in the future is already long term for most economists.

[@Aedar]

Just want to point out one thing, at 3:45 while I'm happy my country (CZ) is considered "advanced economy" and I understand that this was just a generalization of average debt, we actually had one of if not the lowest debt to GDP ratio in EU, pre-crisis roughly 28% and our highest during/post crisis was 2013 at roughly 45% and has since fell down to roughly 30%... Although I am certain that this hellish year will rocket those percentages up, not just because of borrowing but also because the GDP will decrease by quite a lot...

[@thomasaquinas5262]

As a retired CPA, I can say that debt service is a function of confidence, percent of overall income that is debt service, and overall assets that is related to debt. In other words, as a vast rich nation, our crushing debt burden was constantly addressed and serviced. When we closed down, then tried to revive, our income plummeted and the reasonable debt load became crushing. We are at a crossroads, either returning to normal, or facing a debt crisis. The threat is loss of confidence, not some arbitrary bright line test. Jefferson said it best when he deigned that every 20 years, one generation will shield the next from its debts...

[@juanluistostadocanales3955]

1929 all over again!. And the way out is SCARY.

[@juanluistostadocanales3955]

Like 1929 the most likely next step is WAR.

[@PremierAlanMC]

@@juanluistostadocanales3955 wait what? Why would it lead to war?

[@dr.lyleevans6915]

Juan Canales the US didn’t enter WW2 until December 1942 though

[@juanluistostadocanales3955]

@@PremierAlanMC Just listen to Mr Dalios (Bridgewater)

[@juanluistostadocanales3955]

@@dr.lyleevans6915 Just listen to Mr. Dalios(Bridgewater).

[@YamiPheonix531]

The more money governments borrow the bigger the principal. The bigger the principle the bigger the interest accrued on that principal. The bigger the interest accrued the bigger the payment on that accrued interest. The bigger the payment the smaller the amount of tax revenue funding the nation’s public, private, and government operations. 2% interest on a $10 trillion principal is equal to a 1% interest on a $20 trillion principal. If interest rates increase, and they will, the government just made their financial insolvency inevitable. Financial insolvency and fiscal/monetary collapse destroyed just as many kingdoms, empires, and nations as military defeat.

[@QuestionEverythingButWHY]

“Every time you borrow money, you're robbing your future self.” --Nathan W. Morris

[@zeno0b]

Tell that to KKR and Apollo

[@twat240]

Except for the fact investments often mean you gain profits....meaning when you borrow at 1% interest rates and invest into a company whose value grows by 10%...you have more....

[@ignition1199]

well in current economic system it's right but if partnership and equity basis are adopted then situation shall become better

[@kingwashere7070]

If you borrow to start a company then you are making your future richer

[@collin9085]

"economists aren't sure why interest rates have remained so low" Umm... pretty sure the central banks set the interest rates at zero. You need to get some better economists. And this channel calls itself "the economist!?"

[@MartinMenge]

I guess they could have phrased it better, but they are not wrong. Central banks don't set interest rates (unless maybe in a command economy). They have monetary policy instruments at their deposable that may influence interest rates, but not set them. Policy committees have to respond to macroeconomic conditions. One of the policy instruments at their disposal is setting a repo rate (the interest banks pay the central bank) but this can, at best, only influences interest rates. Think of it like this. The repo rate is like a tiny rudder and the domestic economy like a massive yacht. The direction the yacht is going is determined by the wind and the currents, the only thing the rudder can do is navigate the waves to smooth-out the journey. So there isn't consensus on why the conditions prevailed that allows low interest rates.

[@josephbrennan370]

The central bank merely influences other banks to change their interest rates by changing the Base rate. The Base rate is normally the same (or close to) the interest rate you get from whatever bank you go to.

[@collin9085]

@@MartinMenge Well in my non-expert observation, it seems like the fed has more than a minimal influence on interest rates. They seemingly dropped overnight when they lowered their rates earlier this year. But also the crazy amount of debt keeps us from raising rates. If the rates rise we can't afford the debt payments. I dunno, I hear a lot of consensus. I mean there is always disagreement. Some economists are actual socialists, some are Austrians, some are Keynesian, etc. Of course they will never agree. You can probably find a doctor that thinks obesity is healthy.

[@hiromiikegami6320]

You need to understand why central banks set interest rate targets. Lower interest rate policies are "expansionary", they are meant to encourage growth in the real economy (eg. by encouraging borrowing to finance business investments). Higher rates the opposite. The world entered the last recession in a situation where interest rates were very low, despite the then high rates of growth in the economy, not because of gov't debt (increases in that would put upward pressure on interest rates, although it matters who is buying the debt). Central bank policies like quantitative easing, in response to the recession, did push down rates, but the 'natural' rate was already low.

[@collin9085]

@@hiromiikegami6320 Yes, I understand that. Prior to the recent events (which is what the original post is referring to) the previous low interest rates are because of the extreme debt in the system. You can't afford to pay back debt at high interest rates, thus they must remain low.

[@byronstembridge1727]

One thing I didn't see in this video was unfunded future liabilities. I call this the high blood pressure (the silent killer) of government budgets. Going out 75 years the US has a true national debt of somewhere between 138-156 trillion (source: Truth In Accounting and USdebtclock.org) when unfunded future liabilities are accounted for. The US is not alone. Other developed countries have massive long term holes like this in their future budgets they have no accounted for either. It's a silent killer that no one is talking about.

[@Evilemil89]

Wow there was a lot of commercials for such a short video

[@luckeblack9139]

Brave browser. You are welcome

[@MuchoMate]

So if govs borrow too much, it means that to pay back they might not have enough from regular sources like tax, and might print money instead, which is a way of devaluating their currencies, is it more or less so?

[@Jef-b6o]

Money printer goes Brrrrrrrrrrrrrrrrrrrrr

[@Homeschoolsw6]

Any debt is too much debt. It's a strange way of seeing things to think otherwise.

[@Finance-Food-and-Freetime]

It’s not really called borrowing when you “borrow” money and the repay it with money you just invented. No mention of dropping the gold standard in the 70’s and governments then printing money to keep inflation moving and devalue their fiat currencies so the debts become insignificant. I think major inflation is on the way soon for all things that are made elsewhere

[@dansu3135]

Of all countries, here in Canada we have the best PM ever...he doubled the accumulated debt of the country in just 6 months....and keeps on rocking !

[@MrTimy06]

Thank you for this video. You said economies can sustain debt as long as the GDP grows faster. That's sensible enough, but how can we be sure the GDP will always continue to grow? Won't it naturally slow down over time, stagnate or even go down?

[@pieluver1234]

That's a risk people are betting on

[@farrock777]

Yup. Gambling at its best

[@akastenas]

Entropy sooner or later will touch even the stronger economies. However stagnation does not happen overnight no?

[@kingwashere7070]

This is why im using all my money to buy jellybeans. SOON WE WILL ALL TRADE WITH JELLYBEANS.

[@Kongajinken]

As long as populations keep increasing than it should be ok I would think.

[@darren_myatt]

If interest is abolished as it is prescribed in the Islamic economics, there won't be any colossal debts at all. There won't be any artificial creation of money. Banks would function as repositories of people's money and as a third party in business and commerce lending people's money with people's consent to entrepreneurs with the risk being shared according to a set formula agreed upon by the parties involved i.e. the depositors, the bank and the entrepreneurs.

[@michellejue3199]

Its unlimited since it's made out of nothing.

[@markuchiha7737]

I cant imagine in the next few years we are still living with this. I gave up my extroversion I will just stay at home for years.

[@overthetopandrewgoal1580]

But to who do we owe the debt to? Or is it just bunch of digital numbers that can be created out of thin air and can just as easily be erased out?

[@thelouster5815]

It’s to the people who purchased government bonds, mostly being the Federal Reserve.

[@Panthers1521]

I love you guys. Starting reading the economist, and you completely opened a part of my Mind that didn’t exist. Thank you.

[@geoffmcarthy7314]

we are still paying debt that is over 100 years old...SEE A PROBLEM ?

[@geoffmcarthy7314]

Somarik Green reading what you say makes me want to run to the coin shop . I have a feeling the elites have known this . I also feel they laugh at us . Do the elites own all the gold or are they asleep too ?

[@chrism3933]

@@geoffmcarthy7314 central banks accumulate gold like drug addicts go through needles.

[@stevo-dx5rr]

Chris M All the gold in all the banks all around the world is valued, dollar denominated, less than the US deficit. It’s not even half. The gold standard was a terribly volatile system that fell apart numerous times, which is why we have flexible (fiat) currency now, so that governments don’t have to default and take austerity measures during a recession causing a depression, which history has shown happens time and time again.

[@dantheman4011]

@Somarik Green Yep and then bread cost 500000000000000 , no big deal

[@JTDyer21]

I think the debt is a serious problem. Most people don't. That's their business but I'm not waiting until it gets worse. I worked 60 - 80 hours a week for almost a year to pay off my own debts. Now I'm debt free and investing. This way I can build wealth and use this debt problem to my advantage.

[@dnyalslg]

This has been a pretty balanced review. Excellent.

[@gwarlow]

Quick answer. It is never too much. It is debt based on nothing. Just digits in an electronic fantasy world. No need to worry about paying it off because it doesn't actually exist. It's just there to frighten the 99% into continuing to pay their taxes and to expect nothing in return except more austerity while governments continue to over-spend their imaginary currency. La, la, la, la, la, la...

[@racksityentertainment]

Public Debt?? to who?? I don’t owe money to anybody?? I refuse this scam... 😑

[@joythought]

Actually increases in public debt also increase private assets. Double entry accounting at the macro level. But sssssh, don't tell the peasants that they could share in this via a sovereign wealth fund.

[@thegoodfolk]

Low interest rates are not a mystery. Interest rates have largely been driven by governments. Governments have set their interest rates low for decades now so therefore interest rates are low. This is common knowledge in mainstream economics. Sad for a publication called the Economist.

[@IvanVesely920]

You people need to learn about modern money = accounting. Then you might be able to see that public 'debt' is not really a debt.

[@IvanVesely920]

​@@Mistrinho What is called 'public debt' is the government being in negative equity (its liabilities are greater than its assets). But that's only one side of the overall accounting. Individuals, households and corporations are overwhelmingly in positive equity (assets greater than debts). If the private sector is to be in positive E on aggregate, somebody then has to be in negative E - who else than the gvt. And what is called public debt is only the total sum of all government issued currency (notes, coins, digital reserves, bills and bonds). All governments' liabilities are somebody else's assets.

[@thelouster5815]

UsperKrephus Sorry but government equity and private equity are not directly correlated. Government debt is steep at the moment because they are funding a majority of their programs through bonds, and a majority of their bonds are bought by the Fed, who uses them to create the US currency.

[@IvanVesely920]

@@thelouster5815 They are not correlated, they are connected. It's a closed system with a common unit of accounting ($). If you have positive $ denominated equity, that means the rest of the world is in negative $ equity by precisely that much. See, unlike gold, a $ is always 1 party's asset and another party's liability. The gvt is not financed by bonds. Bonds are a tool to control the amount of reserves and the target interest rate. The gvt can just as easily manage its spending without issuing bonds, as they have a central bank for any and all payments (observe BoE 'monetizing debt').

[@fizmanjamal2683]

Stephanie Kelton wrote a great book that explains this. I'd recommend people give it a read if they want to understand how it all gels together

[@thelouster5815]

UsperKrephus First of all, the relationship between government and the public is far more complex than simple accounting, and is certainly not a closed system (particularly the model you just provided is far too simplistic). Secondly, saying the government can go to the Fed for all payments is just asinine and shows you have absolutely no clue of what you’re talking about. If Congress could go to the Fed to make all payments, there would be absolutely no need for taxes. Furthermore, it appears you have no idea how the Fed even works with such a statement. The Fed creates money by buying bonds, which in turn are paid back via taxes. A far more accurate description would be “Congress resorts to the Fed to fund the majority of their programs by, in essence, receiving loans from them”.

[@nihilityjoey]

I still wonder why people hold such a high regard for money, money is worthless. The fact that we are in debt just reinforces that. We could accomplish so much more if we didn't have it.

[@tibsyy895]

The whole world is a house of cards!

[@hadracks]

Evidence?

[@chrism3933]

@@hadracks the amount of debt.

[@hadracks]

@@chrism3933 Pretty weak considering many countries have had far worse debt in far worse circumstances but I don't think you are evidence oriented.

[@chrism3933]

@@hadracks I think your evidence hasn't convinced you either. Or else why ask?

[@peter1062]

No matter how bad the economic situation is, governments can always find money to fight a war.

[@WilliamThePayne]

Great video and a great piece of filmmaking. Your use of graphics and music are very impressive.

[@jordankriss2440]

Thank you Economist, for releasing the great content always.

[@trojan3799]

There is no savings glut, central banks are the primary driver of lower rates. Simples

[@JeremyMacDonald1973]

They can only reasonably keep interest rates low if inflation remains low. Basically the Central Bank has to respond to the inflation rate and they don't control that. However inflation rates are currently low, for reasons no one is really certain of (want to hear economists argue with each other - bring this up - most have a pet theory but there is little agreement). So long as the inflation rate stays rock bottom interest rates can remain low.

[@trojan3799]

@@JeremyMacDonald1973 There are a number of factors contributing to low inflation- demographics,technological change. But what central banks fail to understand (or do) is that pushing interest rates at and bellow 0 bond is inherently deflationary. There is no emprical evidence to suggest lowering interest rates increases inflation/economic growth. It is the supply of money and credit which is not circulating in the real economy, as seen in the all time low velocity of money figures. On top of this, there is plenty of inflation if you know were to look. The only reason interst rates are low is not because of low inflation but the level of debt accumated by households, corporates and governments. They are trying to avoid a deflationary depression(understandably). But with such high debt levels brings about a limit on the amount of credit/money that banks can issue into the real economy. To the point that the levels of debt are diminishing to economic growth and thus inflation. But this can't last forever and i suspect we will see a combination of inflstion rates of 10% and deflation from the mass debt overhang. Central cannot prop up this mess for ever.

[@trojan3799]

@Nonso Okonkwo Yeah, i agree, Which is masked in the cpi figures. But the idea that cutting rates to 0 or negative spurs inflation is a joke it does the opposite - see Japan and the eurozone. Keeping zombies companies alive with cheap credit does not fair well for dynamic growing economy. Which is why government's are taking a larger and larger share of GDP.

[@trojan3799]

@Nonso Okonkwo Yes, I agree. Private sector debt has reached its limit and so will require governments to step in. this video fails to mention why interest rates are low lol. There is a limit to which governments can monetize their own debt and suppress yields to make up for the lack of demand for it. Nobody in their right mind would hold a government bond that is negative-yielding lol. IMO either rates rise or the currency collapses from continually monetising the debt. Hopefully, they will be able to grow the economy in tandem, but I doubt it. At best hope to manage inflation to inflate the debt away, but it's very hard to suppress rampant inflation once it occurs lol.

[@thelouster5815]

Jeremy Mac Donald Central banks control the creation of money, which is directly responsible for inflation and deflation.

[@outsidethebox262]

Just remember folks, every time the government says QE, that means the privately owned central bank is allowed to print money given to the government as a "loan". So if everything defaults, every single thing you own will be taken by these central banks as collateral....

[@richyphillips]

The BoE is NOT privately owned.

[@Maarttiin]

Keynes would've be proud of this public spending...

[@virus2003]

At this point even HE could see the writing on the wall

[@deprogramr]

In a lot of places, it's almost free to survive, but more expensive than ever to thrive...

[@Ryo-qk7md]

Have you heard of this Japan place. I think you haven't discovered it.

[@skiran69]

Bruh.. Japan owns a lot more foreign assets than it's debt. It's the largest creditor nation on the planet.

[@sudhanvakashyap297]

@@skiran69 china is first, japan is second

[@marcegger7411]

I must say, this has been perhaps one of the better economics videos on youtube yet. The Economist really outdid itself and I hope to see more content with this level of professionalism and clarity

[@Showmetheevidence-]

The content is so wrong it’s funny.

[@duc24101986]

I watched to the end and it says "unclear", wasted my 9 minutes

[@ocheltree1]

Minh Duc Pham, thank's for saving my 9 minutes.

[@gabrielmello8633]

Same here

[@dikshasvagarwal]

15% is the answer...

[@florin920]

There is no simple answer to a such general question. There are to many variables and that is exactly what the video says.

[@coorporationfirm3151]

That's as long as GDP growth is more than interest of government bonds, but the specific amounts is unclear

[@timeslips]

The Mersey Tunnel was an example of a project we where told would pay off the loan after a period of time...then have free tolls. I'm wondering if it took them so long to pay for a basic infrastructure project....how long will it take to pay this back. SCAMDEMIC

[@victorrivas7911]

When you say "America" you're talking about the whole continent or just the U.S.?

[@josephbrennan370]

It's usually just the USA.

[@victorrivas7911]

@Tatsujiro Kurogane Also in Canada when someone says "in America..." They mean the U.S.? It shouldn't be like that!

[@whitephoenixofthecrown2099]

@@victorrivas7911 yes it should.

[@MADnanOOICU812]

The United States of America is the only country with the term "America" in its official name. There is no continent called "America." There is "North America" and "South America." And, when referring to both of these continents the term "the Americas" is used. I hope this helps alleviate your confusion going forward.

[@JJs_playground]

I don't understand this. So what they're saying is we can continue to borrow indefinitely? How is that possible?

[@wertzui19871229]

MMT is coming to save us all! Embrace!

[@fei0x]

Hurray!

[@swjackson917]

In 2027 we will pay over $3 trillion in interest on our national debt while we bring in $5 trillion in federal tax revenue. Our country is in big trouble.

[@turningpoint4238]

Fills you with confidence for our childrens future. We've got no idea but building up debt we won't have to pay seems to be working now.

[@CEROtian9279]

How can you have a higher interest rate when companies are not borrowing? The major corporate borrowers will probably be those in manufacturing business, and since they all preferred open new factories in developing nation, there's simply less demand for new loan in developed nations now.

[@nicholasjohnson1295]

I love that I pay more in taxes than amazon. I LOVE IT!

[@jimminycricket3384]

Turns out you pay more in taxes than Donal Trump too. Wait, we all do.

[@nathanbenich9204]

I don't agree with your analysis. I was taught debt is bad in the private and/or public sectors. Inflation increases, value of the dollar decreases, unemployment increases, etc.

[@maruf8273]

Is it just me or does this sound like a giant Ponzi Scheme?

[@alfredoduarte3746]

Maybe a basic question, but were does the borrowed Monet comes from?

[@medielijah]

The ability to 'grow' the economy out of debt is HEAVILY dependent on the government being mindful, reasonable and sustainable with a high level of self control/self restraint. All attributes you would fail to find in todays governments. The fact that governments buy into this so readily just shows how immature their thinking and reasoning is. This will not work. On the contrary, the toll will be exorbitant.

[@sakshibhatia3282]

How will a rise in interest rates be an issue for countries that have already borrowed? Won't they have to pay the agreed upon interest rates? The issue would then arise only if the country is dependent on borrowing.

[@BibleReadingmadesimple]

The moment he said - safe asset like the bonds.. i turned off.

[@V.E.D.A.N.G]

What does it mean can you elaborate ?

[@davidcooks2379]

Should the mandate of central banks be changed from price stability to maintaining low unemployment?

[@karenness5588]

"Crippled by the pandemic..." No one knows why interest rates are low???? Oh, puhlease!!!!

[@plotonapolonich5513]

How does rising interest rate increase interest expense burden on government's outstanding debt? Aren't most govt bonds issued with a fixed interest rate? So once they are sold and gov't collected cash, their future obligation of interest expense and collateral repayment is fixed. If at any point after the issue, interest rates rise, doesnt it only affect govt future bond issues? And any fluctuation in yields of existing bonds only affect holders of those bonds and not the issuer? Can someone explain plz?

[@ethisrising7130]

Hey anyone should check this dude out Paul Helfer, he's verity CPA as well. Investing with him is really awesome, just got my ROI and I'm so glad

[@b.kingguntats4429]

I've seen alot reviews about Paul on various channels, never felt like going through with investing due to alot of unforeseen shifts in the market.

[@qiang.an.chenglei913]

Yea, Paul trades high leverages on certain swings in the market. He does a great job .

[@veronikaanya54]

Most strategies hinges upon an economic collapse, economic recession is everything betting against the US market.

[@kristian.or.levites2545]

Can all nations become wealthy?

[@ignatibaraig1122]

@@kristian.or.levites2545 there is a split in the economy already.

[@brandonstewart2534]

What about quantitative easing?

[@bhuvan1993]

You know why Britain's govt debt has seen fall from 1850 ... "INDIA"

[@Zen_Power]

Realistically most debt will never be repaid so Why would anyone want to own this debt knowing it will never be repaid? Why are organisations lending money knowing they will never see it again? And does it mean that money is actually worthless? The interest alone is crippling to our economy.

[@TreDogOfficial]

I find it interesting how The Economist isn't sure why interest rates are so low. 🤔If government borrowing hinges upon low interest rates🧐and central banks set overnight lending rates🤨 what rate do you think credit hungry governments will favor?

[@thamthmit8310]

We as a species owe ourselves money. Love it

[@marknordgard1916]

Everything is OK and stockmarked going for the moon

[@markkuramoto-headey8344]

I've heard many radio programmes and watched videos about economics. What always troubles me is that thay talk about borrowing, how much is too much etc. However, I've never heard any that even hint on there being any limit to the amount of money willing to be loaned. Like this one, they say lenders can be countries, pension fund holders etc, but that happens when the whole world is demanding 'someone' lend it money? Is there a limit? Is it just so huge we are nowhere near reaching it, so can ignore it?

[@Kiseu_Daniel]

African Countries: Hold my beer

[@Omar-cr9jf]

Most are below 100% Europe though is another story

[@invincible-frame]

This video is completely wrong. The author clearly doesn’t understand how money works after 1971. US government doesn’t need borrow or tax to spend. They print USD to spend. The interest rate is not controlled by the market, it’s determined by the US government.

[@geoffmcarthy7314]

ENGLAND IS STILL PAYING A LOAN FROM 1798...see a problem ?

[@vajliakduke6231]

What do you mean?

[@geoffmcarthy7314]

@@vajliakduke6231 the original loan from 1692 of 1 million pounds hasnt yet been paid in full...i got the date wrong but its even older than i thought

[@michaelmcfeely6588]

We should change our focus. This month the U.S. national debt reached $28 _trillion._ This debt will be an endless burden on future generations and is a threat to our freedoms and prosperity. I am ready to put all of government on a diet.