Key here is govt can monetize their own debts by printing the money in their own currency the debt is serviced so tax rev is irrelevant ..taxes are about legitimizing the currency so they can continue to print base money. Inflation is a managed default
well said lol. It's like people screaming stock crash but it doesn't happen for the last 2 years, because everyone got scared and started to cut cost and avoided a hard crash, for now.
Great analysis Ramin. I note you said before a lot of UK government debt is in inflation linked bonds, that's looking like a smart decision for the government now.
Debt has always been a part economy, but real problem is debt is bigger than revenue with interest rate is extremely unsustainable with more and more bonds being issued and low interest rate bonds being replaced by high interest rate bonds
The popular debt to GDP metric as no real meaning. It consists of comparing a stock with a flow. They don't even have the same units of measure. We state debt in terms of dollars (in the US.) We state GDP in dollars per annum (again in the US.) You need other metrics to determine the relevance of these two units of measure. For example, what are the terms of the debt?
Japan is always shown as an outlier but they have high levels of personal savings. More of an internal problem than owing a load of money to somewhere like the UAE.
Excellent video. I've been trying to find an objective assessment of the impact of the US debt on capital markets, and here you're. Thanks a million, Ramin.
Interesting that the lowest ratio on the entire graph was in about 1975 when inflation was massive. Was the ratio low because wages and taxes were shooting up ?
Very good! Excellent work! I understand why you minimize the risk of the worst scenario. However, given the climate change we encounter, I believe inflation will continue in the near future. That will rise bounds interest…
Well I've heard every opinion on this and it seems to range from "it's a none issue, it's just an imaginary number" to "OMG it's the end of the world". So not sure what to think.
Usually it means almost no one has a clue, and its likely not as bad as it seems. But this is just based on life experience with stuff described like that.
We hear a lot about dedollarisation, because the likes of China are selling their dollar reserves, but the truth is the dollar outperforms most currencies, and so long as it does countries/investors will always buy their debt.
@@markturner5534 Supposedly China is selling because it needs the money, not because of "dedollarisation". How can there be dedollarisation when the share of dollar in the SWIFT transaction has risen in the last months? Euro has actually lost some of its positions. And not to the yuan.
Hi Ramin, @19:43 how do lower yields lead to lower cash flows? I thought the yield increase shows the increase in cash flows. This would drive a reduction in prices which now have to adjust to match the higher yields. Please help me understand if possible.
@@janentomenkafka Hi, What i was questioning was Ramin said higher yields means lower future discounted cash flows. I thought higher yields meant higher future discounted cash flows.
Yes, when Japanese interest rates are no longer negative. 10 Yr JPY is now 1.0% Also when and if the BOJ and Japanese treasury starts to slim down the buying of Japanese debt, (to keep those rates down, QE style.) They have practically been the only buyer for many years and that has kept the interest rate "submerged." There has also been talk recently of less bond buying. So they want to raise rates as inflation in Japan is starting to annoy people. But BOJ clearly has no intention of wanting to crash its bond market. But there's only so much it can do. The Japanese can control their own interest rate, but as we have seen, not the strength of their currency. Which is an altogether far more difficult thing.
So what's the solution for the US? If there's not much room for spending cuts, how much would taxes have to go up by to bring the debt levels back down to a sensible level, and how long would it take?
Growing faster than debt is the solution, but for that you need to invest or stimulate through laws or money that growth, whether its specific sectors, companies or even talented individuals.
Yes. They have the same problem as you. You cannot stop spending too. Or can you live with absolutely no money? And I guess your policemen etc. expect their wages to be paid every month. They won't get any when the government stops spending.
I don't think it is so much a spending problem, but a problem with tax income. The rich aren't paying enough tax on their capital. This would increase the income for the government and create a tax surplus that could be spent on debt and the middle/working classes.
@@MarkCW When you raise the tax on the rich, they raise the prices of the good and services that they provide to the poor, so the poor end up with less. With less capital business would not build new factories and they would hire less workers. Walmart taxes go up = prices of the goods at Walmart go up. A flat tax of 20% on everyone with zero deductions would work better, but it will never happen, because everyone even the middle class love the deductions that lower their tax bills. Also, if there was a flat tax it would cause H & R Block and other tax professionals to go out of business. I am 68, zero debt, and my wife and I are able to save $20,000 per year out of $44,000 in retirement income. Cook meals at home, and say no to plenty of WANTS, only fund NEEDS. Since 2018 I have paid off $25,000 in credit card debt, Paid off a new 2020 Ford Edge $37,700 and will have $25,000 in my 5.25 % savings. I have become a non-consumer for the most part. I love watching my account balances go up every month.
I did go to look at their website hoping to see the £100 share offer but it wasn't there. Instead they're offering a £200 share ifvyou invest 10k or more!
I like S&P 500 funds, but I also like gold. I liked that you didn't attack gold like some investing channels do. Everything has its place in the investing world.
Those who attack gold may be telling you to buy Bitcoin instead. Gold does not produce anything, so it isn't really an investment. But it is a rare and valuable metal and always keeps its value. If gold goes up, it basically means the value of money has gone down. So it is a good hedge in times of high inflation.
DEBT is a Global problem. The World is awash with debt and all will be well as long as the debt can be serviced….Fine when interest rates were near Zero % between 2008 and 2024. Now interest rates are increasing and of course if the same remedy is applied as when the 2007/8 crash happened, then the Debt increased again as the money printing takes off. It’s a viscous circle which increases debt BUT enables the wealth to move upwards like the game of monopoly.
In minute 6:00 you show that 97% of GDP debt is held by the public - so the public uses this debt as a savings financial instrument. Why is that a bad thing? The bigger this debt is - The bigger the public's savings. - This is what MMT advocate for . Watch the movie Finding the money.
Traditionally, stock markets go down when interest rates go up. When borrowing becomes more expensive, companies make less profit. Plus, people buy less when borrowing is more expensive. And on top of that, during such times government bonds with a high interest and low risk are more interesting than shares. Edit: I don't know anything about the effects of a global war. I guess I would have bigger worries than my small investments ;-)
Does spending tax money on Medicare and Medicaid have second order effects that contribute to a net increase or net reduction of debt/GDP? Perhaps an increased productivity?
I am never sure if the "sponsored" videos are supposed to be click bait, or it just turns out that way. We have Debt twice and Crisis once in the title. Just need Ramin driving a lambo now.
We know that we can print money into existence to give people permission do do good things for themselves and for others. When are we going to learn that we can forgive any debt for which there has been a satisfactory return on investment ... There's a lot of magic in money that we have yet to discover!
It's one of those things if everyone is worried about it then it won't be a problem. If everyone is passive and not caring, it'll rear it's ugly head and smash us to pieces. Moderation and cautiousness will be the key to balance and patiently resolve our issue. HOWEVER under pressure from big corp who want interest free money, how long can our treasury hold it's rein? Plus with a new president after this election, who knows what will happen.
That's the Real Issue. A 'New' President? If we elect one, it will be 'more of the same', and even worse. If we elect the other, at least we know he's been there before, and well...that 'jury' is still out, if you can trust it.🤷♀️ Do we want a Socialist or a Patriot for a Leader? Either way, our country has a lot of work ahead to fix it. One will work against our country moving forward, the other Will Move It Forward. Trump 2024🇺🇲
It is more than public sentiment. Growth stocks are often newer companies who are expected to grow fast and create a lot of profite. The key word here is expected. During uncertain times, investors will more likely sell these shares than say Mr. Kipling, because Mr. Kipling has already proven that he bakes exceedingly good cakes.
There appears to be no sign the US debt will decrease anytime soon, this is not new news and has become a huge problem for which the US goverment have no ready made solutions to hand - it can't keep on stacking up debt interesting times ahead would be an under statement!
Maybe AI will cause a two fold increase in productivity and we can grow our way out of this problem and get DEBT to GDP down to 50%. As long as the interest payments continue to be paid there is zero reason to ever pay off any of the government debt.
@@jefferysurratt5650 I don't see AI having any influence in the countries where production of the worlds products resigns...China but now it's neighbours are taking over. That being cheap labour / know how plus good supply chains, all the attributes the US and other industrial countries once had but choose profit over jobs, Apple for example!
An entire banking system collapsing because of this I see as almost impossible on its own without some other factor influencing heavily, a meltdown in the style or worse of 2008 or worse - absolutely. But not some banking apocalypse. In the end if the real economy is intact it will support the creation of an updated financial sector on the "ruins". What should be worrying are the "factors" that can come with this event, like momentous high levels of unemployment, unrest, etc etc etc. But this is in no way certain to happen. And it depends on so many other things.
Its no trick really, Italy is actually quite the powerhouse, just a stagnant one. Soo many people think Italy is just tourism, fashion and whatnot. When Northern Italy's economy is pretty comparable to, say, Germany.
If US yields spike up, FED will come to the rescue by buying bonds to drive the yields back down. IN that case USD will collapse, inflation will go up but stocks will run much higher. Anybody disagree?
Dear Mr PensionCraft. Why are you characterizing entitlements in a way that leads viewers to think all entitlements are paid with US DEBT? What about all of the entitlement payments over the decades? What about the entitlement surplus from years ago? Please address this issue in a future video.
Thanks, great video. You suggest buying gold. But surely you wouldn't sell down your core global fund in the event of a crash? Isn't the better medium/longterm approach to ride out whatever the market is doing? Or is that a time to sell up at least some of your holdings and move into gold and cash?
It's not debt. It's just a record of the money that's been issued into the economy duplicated in the bond market with a form of interest-bearing money. It doesn't fund government. It's like unemployment benefit for rich people and other than that has no proper place in modern economics. Looked at in another way, the 'Debt'-GDP ratio is headed upwards at that rate partly because too much austerity economics has held back GDP growth. The Trussonomics crash, whatever one thinks of her political objectives, was an undermining of democracy. Government are elected to put in place certain economic policies and there needs to be space for them to do that. If there is a market sector out there preventing that then that market might need some regulatory adjustment.
Acquire the information about the BRICS and how to switch to the BRICS before the global currency reset takes place? Dont be a victim of that great reset. i offer free courses so the floor is opened to participate in the BRICS for your own safety. The Economy and Banking sector is at its brink, and a NEW MONETARY SYSTEM is taking over!
As the US collapses they will simply ramp up the money printer, it's how all collapsing currencies in the past have managed this. So growth stocks could be the winner 😉
I love your gentle 'it could be nothing, but do keep an eye on it' approach.
Key here is govt can monetize their own debts by printing the money in their own currency the debt is serviced so tax rev is irrelevant ..taxes are about legitimizing the currency so they can continue to print base money.
Inflation is a managed default
It's never a problem, until it's a problem.
well said lol. It's like people screaming stock crash but it doesn't happen for the last 2 years, because everyone got scared and started to cut cost and avoided a hard crash, for now.
Thanks Ramin for always putting out good quality content. I really appreciate the amount of work you put into this channel.
Glad you enjoy it@MarkCW
Really love your videos. You always give such a thorough explanation of the subject at hand. I learn quite a lot. Thank you!
You are so welcome @dis081278
2:35 shocking that it was 35% just before the Financial Crisis and is now 100% and rising inexorably.....
The great reset will come.
Very interesting Ramin, as I have most of my cash in the S&P 500, this is excellent content.
Great analysis Ramin. I note you said before a lot of UK government debt is in inflation linked bonds, that's looking like a smart decision for the government now.
Debt has always been a part economy, but real problem is debt is bigger than revenue with interest rate is extremely unsustainable with more and more bonds being issued and low interest rate bonds being replaced by high interest rate bonds
The popular debt to GDP metric as no real meaning. It consists of comparing a stock with a flow. They don't even have the same units of measure. We state debt in terms of dollars (in the US.) We state GDP in dollars per annum (again in the US.) You need other metrics to determine the relevance of these two units of measure. For example, what are the terms of the debt?
Japan is always shown as an outlier but they have high levels of personal savings. More of an internal problem than owing a load of money to somewhere like the UAE.
Excellent video. I've been trying to find an objective assessment of the impact of the US debt on capital markets, and here you're. Thanks a million, Ramin.
Glad it was helpful @blhlow4904
Interesting that the lowest ratio on the entire graph was in about 1975 when inflation was massive. Was the ratio low because wages and taxes were shooting up ?
Buy physical silver and gold before its too late!
Great video - top drawer again!
Thanks @fusemunk
As The Smiths might have said, Some bonds mature quicker than others.
Very good! Excellent work! I understand why you minimize the risk of the worst scenario. However, given the climate change we encounter, I believe inflation will continue in the near future. That will rise bounds interest…
in Idaho they block waterways to farmlands
Well I've heard every opinion on this and it seems to range from "it's a none issue, it's just an imaginary number" to "OMG it's the end of the world". So not sure what to think.
Usually it means almost no one has a clue, and its likely not as bad as it seems. But this is just based on life experience with stuff described like that.
We hear a lot about dedollarisation, because the likes of China are selling their dollar reserves, but the truth is the dollar outperforms most currencies, and so long as it does countries/investors will always buy their debt.
@@markturner5534 Supposedly China is selling because it needs the money, not because of "dedollarisation". How can there be dedollarisation when the share of dollar in the SWIFT transaction has risen in the last months? Euro has actually lost some of its positions. And not to the yuan.
Creating currency units out of thin air has consequences
@@theguy9067 It sure does. It's called "money".
Hi Ramin, @19:43 how do lower yields lead to lower cash flows? I thought the yield increase shows the increase in cash flows. This would drive a reduction in prices which now have to adjust to match the higher yields. Please help me understand if possible.
I believe he said higher yields. Unless I heard what I wanted to hear 🙂
@@janentomenkafka Hi, What i was questioning was Ramin said higher yields means lower future discounted cash flows. I thought higher yields meant higher future discounted cash flows.
@@BeastProSHADOW Hi, I understood it as high (treasury bond) yields means lower discounted cash flows (for companies).
@@janentomenkafka Right so the cost of capital (borrowing) goes up so the future cash flows are now discounted by a larger factor.
People have long asked "when will the debt matter in Japan" - well, looking at the Yen lately we may be getting an answer to that.
Yes, when Japanese interest rates are no longer negative. 10 Yr JPY is now 1.0% Also when and if the BOJ and Japanese treasury starts to slim down the buying of Japanese debt, (to keep those rates down, QE style.) They have practically been the only buyer for many years and that has kept the interest rate "submerged." There has also been talk recently of less bond buying. So they want to raise rates as inflation in Japan is starting to annoy people. But BOJ clearly has no intention of wanting to crash its bond market. But there's only so much it can do. The Japanese can control their own interest rate, but as we have seen, not the strength of their currency. Which is an altogether far more difficult thing.
Just curious why there isn't much concern about Japan. ?
So what's the solution for the US? If there's not much room for spending cuts, how much would taxes have to go up by to bring the debt levels back down to a sensible level, and how long would it take?
Growing faster than debt is the solution, but for that you need to invest or stimulate through laws or money that growth, whether its specific sectors, companies or even talented individuals.
Not room for spending cuts? Are you mad, the US spends over £800B on it's military.
Crippling austerity.
How can the goernment spend like no tomorrow ? Cut spending on non essentials such as financing or wars etc
The government just can't stop spending. They're addicted to it.
Yes. They have the same problem as you. You cannot stop spending too. Or can you live with absolutely no money?
And I guess your policemen etc. expect their wages to be paid every month. They won't get any when the government stops spending.
I don't think it is so much a spending problem, but a problem with tax income. The rich aren't paying enough tax on their capital. This would increase the income for the government and create a tax surplus that could be spent on debt and the middle/working classes.
@@MarkCW I used to think that way myself.
@@RightSideNews So what has changed you thinking that way now?
@@MarkCW When you raise the tax on the rich, they raise the prices of the good and services that they provide to the poor, so the poor end up with less. With less capital business would not build new factories and they would hire less workers. Walmart taxes go up = prices of the goods at Walmart go up. A flat tax of 20% on everyone with zero deductions would work better, but it will never happen, because everyone even the middle class love the deductions that lower their tax bills. Also, if there was a flat tax it would cause H & R Block and other tax professionals to go out of business. I am 68, zero debt, and my wife and I are able to save $20,000 per year out of $44,000 in retirement income. Cook meals at home, and say no to plenty of WANTS, only fund NEEDS. Since 2018 I have paid off $25,000 in credit card debt, Paid off a new 2020 Ford Edge $37,700 and will have $25,000 in my 5.25 % savings. I have become a non-consumer for the most part. I love watching my account balances go up every month.
I did go to look at their website hoping to see the £100 share offer but it wasn't there. Instead they're offering a £200 share ifvyou invest 10k or more!
I like S&P 500 funds, but I also like gold. I liked that you didn't attack gold like some investing channels do. Everything has its place in the investing world.
Those who attack gold may be telling you to buy Bitcoin instead. Gold does not produce anything, so it isn't really an investment. But it is a rare and valuable metal and always keeps its value. If gold goes up, it basically means the value of money has gone down. So it is a good hedge in times of high inflation.
@@janentomenkafka I just see gold as a better form of money.
@@martync7436 I agree. Governments can't print extra gold out of thin air.
DEBT is a Global problem.
The World is awash with debt and all will be well as long as the debt can be serviced….Fine when interest rates were near Zero % between 2008 and 2024.
Now interest rates are increasing and of course if the same remedy is applied as when the 2007/8 crash happened, then the Debt increased again as the money printing takes off.
It’s a viscous circle which increases debt BUT enables the wealth to move upwards like the game of monopoly.
Good summary 👍
Glad you liked it @vvwalker7261
In minute 6:00 you show that 97% of GDP debt is held by the public - so the public uses this debt as a savings financial instrument. Why is that a bad thing? The bigger this debt is - The bigger the public's savings. - This is what MMT advocate for . Watch the movie Finding the money.
Great video
Glad you enjoyed it @royalmint7831
What are the risk on funds like Vanguard in an environment where debt ..interest and inflation is high plus a global war?
Traditionally, stock markets go down when interest rates go up. When borrowing becomes more expensive, companies make less profit. Plus, people buy less when borrowing is more expensive. And on top of that, during such times government bonds with a high interest and low risk are more interesting than shares.
Edit: I don't know anything about the effects of a global war. I guess I would have bigger worries than my small investments ;-)
Does spending tax money on Medicare and Medicaid have second order effects that contribute to a net increase or net reduction of debt/GDP? Perhaps an increased productivity?
I am never sure if the "sponsored" videos are supposed to be click bait, or it just turns out that way. We have Debt twice and Crisis once in the title. Just need Ramin driving a lambo now.
And flames...lots of flames.
Print more money , ban inflation . It will work if enforced
Maybe if the US would stop slashing tax rates on the rich and corporations we wouldn’t be in these massive deficits.
We know that we can print money into existence to give people permission do do good things for themselves and for others. When are we going to learn that we can forgive any debt for which there has been a satisfactory return on investment ... There's a lot of magic in money that we have yet to discover!
More likely.... In the next Months.... ?
It's not a problem until it is!but then it's too late
It's one of those things if everyone is worried about it then it won't be a problem. If everyone is passive and not caring, it'll rear it's ugly head and smash us to pieces. Moderation and cautiousness will be the key to balance and patiently resolve our issue. HOWEVER under pressure from big corp who want interest free money, how long can our treasury hold it's rein? Plus with a new president after this election, who knows what will happen.
That's the Real Issue. A 'New' President? If we elect one, it will be 'more of the same', and even worse. If we elect the other, at least we know he's been there before, and well...that 'jury' is still out, if you can trust it.🤷♀️ Do we want a Socialist or a Patriot for a Leader? Either way, our country has a lot of work ahead to fix it.
One will work against our country moving forward, the other Will Move It Forward.
Trump 2024🇺🇲
Why will growth stocks be affected by this problem? Just public sentiment?
It is more than public sentiment. Growth stocks are often newer companies who are expected to grow fast and create a lot of profite. The key word here is expected. During uncertain times, investors will more likely sell these shares than say Mr. Kipling, because Mr. Kipling has already proven that he bakes exceedingly good cakes.
There is no problem, thats how we operate.
Not a problem until no more funds to operate government machineries.
New York is almost bankrupt.
Instability will scale.
Смок ты легенда, лови мой лайк сходу! 🔥
When you’re in debt to yourself you might have a problem
The projected decrease in corporate tax revenue is ludicrous lol
There appears to be no sign the US debt will decrease anytime soon, this is not new news and has become a huge problem for which the US goverment have no ready made solutions to hand - it can't keep on stacking up debt interesting times ahead would be an under statement!
Maybe AI will cause a two fold increase in productivity and we can grow our way out of this problem and get DEBT to GDP down to 50%. As long as the interest payments continue to be paid there is zero reason to ever pay off any of the government debt.
@@jefferysurratt5650 I don't see AI having any influence in the countries where production of the worlds products resigns...China but now it's neighbours are taking over. That being cheap labour / know how plus good supply chains, all the attributes the US and other industrial countries once had but choose profit over jobs, Apple for example!
An entire banking system collapsing because of this I see as almost impossible on its own without some other factor influencing heavily, a meltdown in the style or worse of 2008 or worse - absolutely. But not some banking apocalypse. In the end if the real economy is intact it will support the creation of an updated financial sector on the "ruins". What should be worrying are the "factors" that can come with this event, like momentous high levels of unemployment, unrest, etc etc etc. But this is in no way certain to happen. And it depends on so many other things.
Only private credit matters
The US you say? How about Italy in the EU. Italy is too big to fail and how it has not already failed, is tbh some trick and a half.
Its no trick really, Italy is actually quite the powerhouse, just a stagnant one. Soo many people think Italy is just tourism, fashion and whatnot. When Northern Italy's economy is pretty comparable to, say, Germany.
Chinas true debt to GDP ratio is over 300% for on and off books debt at least the US is not that bad, however it needs to address its overspending!?!
One man's overspending is another man's paycheck.
If US yields spike up, FED will come to the rescue by buying bonds to drive the yields back down. IN that case USD will collapse, inflation will go up but stocks will run much higher. Anybody disagree?
Dear Mr PensionCraft. Why are you characterizing entitlements in a way that leads viewers to think all entitlements are paid with US DEBT? What about all of the entitlement payments over the decades? What about the entitlement surplus from years ago?
Please address this issue in a future video.
He didn't.
whatever u saying $$ up up atock index up up
Keep printing free money! Eventually, we will see the light! 😂
It has been a problem for the last 200 years. In other words - much ado about nothing
Thanks, great video. You suggest buying gold. But surely you wouldn't sell down your core global fund in the event of a crash? Isn't the better medium/longterm approach to ride out whatever the market is doing? Or is that a time to sell up at least some of your holdings and move into gold and cash?
It's not debt. It's just a record of the money that's been issued into the economy duplicated in the bond market with a form of interest-bearing money. It doesn't fund government. It's like unemployment benefit for rich people and other than that has no proper place in modern economics.
Looked at in another way, the 'Debt'-GDP ratio is headed upwards at that rate partly because too much austerity economics has held back GDP growth.
The Trussonomics crash, whatever one thinks of her political objectives, was an undermining of democracy. Government are elected to put in place certain economic policies and there needs to be space for them to do that. If there is a market sector out there preventing that then that market might need some regulatory adjustment.
Acquire the information about the BRICS and how to switch to the BRICS before the global currency reset takes place? Dont be a victim of that great reset. i offer free courses so the floor is opened to participate in the BRICS for your own safety.
The Economy and Banking sector is at its brink, and a NEW MONETARY SYSTEM is taking over!
america is facing gloom n doing sooner than later!!!!
axe military aid
cryptocurrency ??
I imagine this will be true for many Western countries in the near future
He loves his Ftrade 🤑 lol
lol yeah $$$$$ 😂
As the US collapses they will simply ramp up the money printer, it's how all collapsing currencies in the past have managed this. So growth stocks could be the winner 😉
Lad
o