Does Government Debt Matter Anymore? | Perspectives On Policy
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- Опубліковано 6 гру 2021
- Proponents of government spending argue that the government can borrow as much as it wants, so long as the interest rate is less than the rate of economic growth. However, government deficits are far too high for this to be the case. Continuing to run large deficits will either lead to higher inflation or sharp cuts to entitlement programs. Solving the US fiscal problem will require strong pro-growth policies, a slowdown in government spending, and reforms to our chaotic tax system and entitlement programs.
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Read “r ⟨ g” by John Cochrane. Available here (PDF): static1.squarespace.com/stati...
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See if you can solve the US debt crisis with the “America Off Balance” Budget Calculator. Available here: calculator.americaoffbalance.org.
Watch “The Economy and the Deficit,” with John Taylor. Available here: www.policyed.org/debt-and-def....
Read “The US Debt: Causes and Consequences” on PolicyEd. Available here: www.policyed.org/policy-insig....
Watch “One Nation Under Debt” on PolicyEd. Available here: www.policyed.org/america-bala....
Read “Thinking about Long-Term Debt” on PolicyEd. Available here: www.policyed.org/policy-insig....
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Continually borrowing against the future is the essence of unsustainability.
they don't borrow against the future, they borrow from themselves
Just such a nice job on this video and I love the clean, slowly sliding graphics.
Politicians will never do this. "after freedom has brought opportunity and some degree of plenty, the competent become selfish, luxury-loving and complacent, the incompetent and the unfortunate grow envious and covetous, and all three groups turn aside from the hard road of freedom to worship the Golden Calf of economic security. The historical cycle seems to be: From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more."
This sounds so deep but i have no idea what you are talking abt
@@bereket9795 de Toucville, French historian 1800's comparing US to all the other great powers that came and went, and so shall we- just as the rest
@@Bullelk44M The US appears to be losing to Russia and China as all of our former Colonies seem to be trading with them?
@@Bullelk44M nah, the US has what others never did, monetary sovereignty
There is NO WAY the economy outgrows the debt.
Never folks are running out of money and credit! Millions of Americans took huge dollars out of their home equity and now blew all that money……blew it!! Took exactly 2.4 years and they are broke and housing market is collapsing! America is in for the ride of their life’s! And with the failed Biden policies it will get us closer to a third world shithole!!
Theoretically, it could if the Feds keep rates at zero for like 50-100 years and US economy keep growing at 2% on real terms. Of course this is assuming that US government cut spending deficit back to
it's not "debt". It's just our stockpile of US bonds. Bonds and dollars come from the same printer and are perfectly exchangeable.
I feel like the Detroit Lions will win three super bowls in a row before the US does the policy solutions prescribed in the video.
🤣🤣love this comment
The problem with economists supporting the US government debt as good is that they have learn only Economics not history
They think of only a century or so but history has taught us that debt is not good
Debt has led to the collapse of empires
Sorry, but that's complete hogwash. MMT economists have learned 5,000 years of economic history and incorporated that knowledge into their analysis. In fact, MMT economists are the only ones I know of who do that comprehensively. Respectfully, you should do some reading on the subject before you just make up stuff about it.
I'm pretty sure they are well versed in economic history
@@TheBandFiles If they're right then prices should start to come down after this crisis, because this year's price increases are not due to inflation, but due to shortages, supply chain issues, Putin's war, anything but inflation..
Not really, economists who says that the size of US government debt does not matter are idiots. Literally all high school economics books tells students that government should only run deficit if that deficit spending leads to an increase in productivity of the economy. But the US government is going into deficits to spend on unsustainable social promises and military which have no effect on productivity whatsoever. Had most of the debt went to increase actual productivity in the economy, the US would’ve never gotten to the current situation.
It's not really debt. Our national "debt" is just a stockpile of US treasuries and US treasuries are just a different form of dollar. Kinda like water and ice. When the US creates "debt" they turn water into ice, and when they pay off that debt, they turn that ice back into water,
The majority of voters will only elect politicians that promise free stuff, so don't expect a fix.
Prepare smartly and get out of the dollars.
Absolutely!
the military industrial complex gets free stuff all the time, as do the big banks, why should every day Americans get it?
The majority of the welfare goes to military spending which is at $800+ billion annually. When just in 2000 it was only about $150 billion per year! The military industrial complex and big businesses that profit from war are a huge reason for the big spending!
4:41 That felt personal 😂
Tax reform, entitlement reform are easy to say but extremely hard in this divided political environment. It seems deficits, debt, and debt service cost will just get worst and worst until a default is forced upon the govt.
The debt is a sign of how much the government is crowding out private sector spending.
Can you explain how Treasury bonds crowd out private spending?
Not if they spend it on bailouts to corporations which is exactly what they are doing.
no ...this is an old idea that has been proven incorrect
Actually about 40% of domestic federal debt is held by the Federal Reserve Bank, not private investors, and about 2/3 federal debt is held by domestic investors. The Federal Reserve Bank forwards all of its profits to the Treasury Department.
@@TheBandFiles Inflation is the "transmission mechanism" by which fiscal policy can crowd out the private sector. I had $100,000 in the bank, then inflation happens and now I only have $90,000 in real 2021 dollars. See how it works? The Fed prints money to support fiscal irresponsibility, and we in the private sector subsidize it through the inflation tax.
Thank goodness. I was worried this was going to be another new age economist saying debt is good, a crash is impossible since we havent seen one! Yes, leveraging debt is good but that doesn’t inherently mean more debt = better.
Debt appears to be good for Bankers who loan money......
We just replace the US Government debt, with Consumer Debt by the Blizzard of Credit cards.
That was how Bernanke and Paulson fixed the 2008 issues.
Now the Consumers are $16 trillion in the hole.....
The Government owes twice that amount......
@@danielhutchinson6604 Debt is only good to bankers if they get a at ot above market interest rate. Not currently happening.
Here is the opposing view to this video:
ua-cam.com/video/FATQ0Yf0Fhc/v-deo.html
the US doesn't have "debt" in the traditional sense. It has a stockpile of US treasuries, which are just a different version of the dollar. Both come from the same place and can be exchanged for one another seamlessly
This aged well. Now we are in a new era of high inflation and rising interest rates.
The graph at 1:49 shows projections of the future deficit to revenue ratio, what/whose research is this based on?
Hello S, the information in this video is a summation of research from John Cochrane. You can find the source material here. --> static1.squarespace.com/static/5e6033a4ea02d801f37e15bb/t/61021eb497ddc12e8106e3b6/1627528884849/rvsg.pdf
When it comes to economic policy we're in a weird fairy tale world where a solid consensus, cheered on by dozens of economic Nobel Prize winners, just knows that the Emperor's clothes are just beautiful. Taxes matter only as a tool to punish the rich and the government can spend without limit, without worry, and without consequence. Thanks Professor Cochrane for a clearer-eyed view of the Emperor's scanty attire.
Who says, "Taxes matter only as a tool to punish the rich"? Certainly not any MMT economists.
What can be done with the gold in reserves like in the Fort Knox in America? Only to sell it. How much cost taxpayers to protect the gold? Fortunes. To sell the gold today spares to pay for the protection tomorrow. The gold market is going to crash and i defend my word against any economist past or present. Russia could go bankrupt and end the war in Ukraine. I think we live in an horrible world, and I was said it is the only one we have. I have to keep trying.
I wish I lived in your dream world where the rich paid more taxes than school teachers.
@@michelangelope830 Russia is not alone......
The BRICS Association is depriving the US of sources of cheap resources from Nations we appear to have intimidated into being Colonial Subjects.
That appears to be why the US has developed their Puppet Government in Kyiv to attack Russia.
It is not producing positive results......
@@michelangelope830of course I'd say so, when the economic world falls what will we do with gold & silver?
Why go they teach financial discipline if it doesn’t matter?
Very well made video, making it so much easier to catch the point.
Imagine this: A Light-year is the distance light travels in one year. A very great quantity, in deed! As Light streams through space at 186,000 miles per second, that means that it travels 5.88 trillion miles in a year. Needless to say, "5,88 Trillion" is a number very difficult for anyone to even visualize. Now try to imagine 30 Trillion! This is the number of Dollars the United States Government currently owes the International Banking System!
And it can afford to pay that off just as easily as it created the debt in the first place
Interest rates are high now. Great video!
If governments debt doesn’t matter then why not print all individual debt so every citizen can start from zero supporting banks all over again?
inflation
those interest payments are gonna matter
To whom?
looks like your on the ball ! will the us default???
so in common speak it a new credit card to pay monthly interest on the frst one
Why $800+ billion for military when it’s not even wartime? It’s insane! Cut their budget by 75%!!
Marshall Glitter explains this very well. We should worry not.
Simple solution: Change law. Fed Reserve Bank determines when and how much money supply should be increased to maintain economic growth with low inflation. If money supply needs to be increased, Fed Reserve Bank notifies Treasury Department to issue a special government bond that only Federal Reserve Bank can buy. This special bond carries no interest and Federal Reserve Bank determines repayment schedule as needed to regulate money supply. No more government interest payment on debt, so national debt decreases. Major focus should be on economic growth, avoiding waste and fraud, prioritizing spending money on what is important, but not debt.
You want a handful of bureacrats to have sole control of the worlds largest economy? There's a reason why ELECTED members of congress control the purse strings. Until we elect principaled politicians the problem wont get solved
This goes to show the essence of credit facility in a thriving economy. Financial advice can never be overstated.
Failing to mention how the post WW2 debt crisis was fixed, I just googled it, by huge taxes, is kinda weird
He mentions taxes are needed. The post WWII debt was able to be paid off because of high taxes & economic growth. The former was a holdover from WWII. The latter was possible, because nearly every other industrialised nation in Europe & Asia was still rebuilding.
Keynesian economics
What part of “consistent primary surpluses for 20 years” did your peabrain not understand?
The Wealthy seem to purchase the Members of Representative Government, to deliver the Taxes that they feel they deserve to pay.
The US Electoral Industry is a $15 billion industry.....
It's funny how Americans are criticized for personal debt but look at our role model lol
Personal debt is completely different than federal debt.
You can't print money so of course there isn't a comparison to be made.
Federal Reserve Bank can create money as needed to buy government bonds. To create a million dollars, someone at the Federal Reserve Bank opens the account of a member commercial bank and types 1 followed by 6 zeros and then hits the return key. As long as someone can operate a keyboard, money can be created to ultimately pay debt.
@@AdrienLegendre "money can be created to ultimately pay debt ..." and generate inflation, which is a tax.
@@johnu7553 not necessarily
Government does not care, j answer to everything in their views is print more money until the printing press is overwhelming
All of those policy reforms/improvements make sense. Guess how many will actually get done without our current leadership?
they don't make sense
What does he mean at 2:20 when he says “but taxes equal to spending for decades would be a debt hawks dream come true” idgi
Ohhh debt hawk as in somebody worried about the debt and a possible debt crisis. Not debt hawk as in foreign treasury bond purchasers. Okay
Yes
I came from Kenya to watch this. Tax percentages are rising every day because of our huge national debt and budget deficits
do you have monetary sovereignty?
The argument the debt interest rate lower than the GDP rate increase means the debt is harmless, is not the whole story.
That theory only works if the debt and GDP rise at the same rate. GDP has risen from $14.7B to $22.5B since 2008, 3.1% annually. National debt has increased from $10B to $30B today, a rate of 8.1% per year.
Won't the debt service increasing 3x GDP swamp the federal budget sooner or later?
no because the fed has full control of interest rates. They could stop offering any interest at all at any time
It does not matter only if there is buyer to buy it. Now the problem is that US debt has liquidity and high rates problems at the same time. Debt celling may be raised up again, but who is going to buy it and paying what kind of rate, are the problems.
the fed has full control of interest rates
Yesss
Government debt matter? Not to pirates in D.C.!
Isn’t all money borrowed? I think every single dollar is borrowed from it’s country’s central bank. I’m not sure this talk is framed correctly.
The power of the US federal government is delegated from the 50 self-governing states of the United States.
According to Article 1, Section 10 of the U.S. Constitution, no U.S. government shall pay its debts in currencies other than gold and silver. That is the U.S. dollars or any kind of IOU is used for paying the national debt is a violation of the U.S. Constitution.
Article 1, Section 10 of the U.S. Constitution: Deprives states of power
No country shall enter into any treaty, alliance or federation; grant trademarks and letters of retaliation; coin money; issue letters of credit; offer anything other than gold or silver coins as a tender for debt repayment; pass any acquirer act, post hoc law or damage contractual obligations laws, or confer any title of nobility.
u cannot be in debt in a currency of which you are the issuer. the federal reserve simply changes digital numbers on a computer screen to pay our bills.
Federal governmental income is about 4 trillions per year. This income is the only thing matters in measuring the borrowing power of the US government same as everyone else when they borrow money from bank.
Elect principaled politicians🤔....is this possible? Are the CITIZENS who vote, principaled themselves? Is the dollar gaining purchasing power?
If you answered no to any or all of these then consider some insurance in the form of gold. Lets also not forget that we are still the worlds reserve currency, and as long as we are, it would be wise to take advantage of it.
Aquire property, commodity etf's, short term bonds, dividend stocks, precious metals, and of course firearms, because...America
Get rid of the central bank and change to a gold or silver standard! Only the treasury should be able to print money, not private bankers!!
I've given this quite a bit of thought for several years. I do welding I do a service for people and they pay me cash. To me that's getting money without anything backing only a service that I provide. I believe there is an infinite amount of money that will always be there and always be traded.. The world will never run out of money because they can just print it and justify it and it never affects anything.. I believe between European nations and and the United States nobody nobody will ever Go broke.. Think about this logic.. If you go out and you are a large mining company and you just produce gold and dig it out of the Earth you have made money out of nothing.. If you go on to the Earth and mine diamonds which is a hugely inflated market it made out of nothing... If you get palladium you are getting something out of nothing you are inventing and creating more money.. The governments have to continuously keep printing money to keep up with the demand.. Is the so called national debt who cares It will never be paid off but the loans will never be called called because more money will just be printed by the massive global banks because they do not want to lose what they have.. The United States will never go broke.. China will never go broke.. Germany will never go broke.. Japan supposedly is So far in the debt it's in deficit completely but yet it never goes broke.. Whatever happened with Greece and it's austerity it's not broke there are still an economy people are still getting their money. Bitcoin is the greatest example of money out of nothing out of nothing but yet it is worth a lot because people say it is just like NFt's... All of the crypto currencies have a monetary value but they are backed by nothing not even a government.. Real estate why is it worth so much money every year every decade every century.. It's demand. Oil and gas made from nothing brought out of the ground and created money out of nothing.. Please think long and hard about this. I do not believe this is a stupid question.. There is no such thing as the United States running out of money it will never happen... Think about all of the different denominations of currency from every country everyone says that their money is worth this amount why... Because their government says so.. Most everything is based upon the dollar because we have the largest economy in the world.. China and Russia Are no different.. People I truly believe there there is no such thing as a debt crisis we just keep raising the ceiling and inventing more money and the banks keep saying OK.. Why because they have endless amounts of money they control the world and the money and never wanted to fail.. Maybe I am talking out of my butt.. I don't know.. Is explain bitcoin.. explain gold. explain silver.. explain copper.. Is explain ridiculous diamonds..Explain art that goes for millions of dollars.. Collectible cars that keep going up in value...
Well, yes and no :) the problem is not that debt may or may not get called, but rather that the servicing of debt still has to be done. Now if this part of the govt. spending requires more and more as part of the whole tax revenue of the US, the govt may have to reduce its spending for other services like infrastructure, social security, etc.. to pay the servicing of its debt. At this point it would require drastic reforms to keep the debt servicing in check and the question would slowly arise "how save is the US as an investment?" . I. E. If I lend out my money, can I expect the US to default? More risk requires higher expected return, hence rising interest payments on the US debt, reinforcing the debt problem. Hope that makes sense :)
@@sebastianr5051 the US can't default on it's own currency. And it's not difficult for them to service any debt issued in their own currency
Eventually interest rate payment will be more than annual GDP of entire states
they could bring interest rates to 0 whenever they want
It allows for negotiations between the house and presidential powers. Like it or not, it is a part of what limits the powers of the US treasury which is a check and a balance on it. Corrupt gamblers want it to not happen but the negotiations need to happen. The current group of people in charge are unethical in their practices and the only reason they are even good enough is because they value truth and reality more so than their opponents. Literally the more I look at politics, the more I just want to burn it to the ground as it needs to be done every 100 years because the laws in place end up with so many loopholes it is unreal. Constitutional convention anyone?
Dude you have complete Saul Goodman vibes tbh
One year old and isn’t it worse, Social Security is not an entitlement, it’s a contract.
Please support the minimum billionaire tax.
Bahahaha. We are on the verge of the debt crisis now. Feds will never stop spending.
It doesn't matter to the people printing money
Great lecture. Yes it does matter. There is no such thing as free lunch. One point was not identified. Printing more $ in the absence of no desire for cutting expenditures and increasing taxes (even each competing to cut more taxes) would lead to depreciation of $, further fuelling inflation, especially given the reality that at least 30% of $ is held by foreigners, mostly by China.
deficit spending isn't a free lunch, it's deficit spending
Whatever you do, don't touch my NPR, NEA or NEH!
For US government it’s business as usual. Any problem later, future generations to deal with them
I think it’s nonsense when people try to draw similarities between the US government fiscal policy and a household budget. They are not the same at all. The debt is a non issue. The USA could pay it off in an instant because they control the money. The consequence of too much spending is not the debt it’s inflation. That’s why the fed raises interest rates to curb inflation. When it does so it is basically reducing the money supply which is inverse to government spending.
"The debt is a non issue. The USA could pay it off in an instant because they control the money." Weimar Germany was fun times, wasn't it?
@@johnu7553 weimar did not have monetary sovereignty like the US.
Does your debt matter?
this is an incredibly oversimplified on one side and greatly exaggerated on the other. First there have been examples of economies running fine with debt such as Japan and there have been good examples on how to tackle debt , such as Italy. A countries debt is not the same as a personal debt , especially when considering a nation such as the USA. Yes , covid and the ukraine crisis have made inflation and debt increase but that does not mean its a disaster. Debt is a great tool to expand an economy and it has been proven to be very successful , and for a nation like the usa its quite easy to cut spending (cut already high military spending's , foreign aid and relieve regulation). I had a project on my masters in risk and management precisely because of this so called debt crisis , although yes , debt spending is generally not optimal and not a positive indicator , i can guarantee the a nation such as the USA its probably just profiting from its great pop growth and trying to keep standard of livings stable after a crisis , just like 2008 , its highly likely this will all be over and everything turn to normal.
P.S Take what i said with a grain of salt , i am no expert i could be wrong/
you are indeed wrong, about debt not being a positive indicator. increasing the debt isn't inherently good or bad, it depends on what the deficit is used to achieve. If you have a high debt, but that leads to productivity, less inequality, full employment and price stability, then that debt was good
Nah it will all balance itself out .
I feel like the fact that this question is being asked is a sign of how fucked we are
it's a sign of how little you know about our monetary system.
Balony. After listening to him, I knew for sure he was a promoter of rightwing/conservative economic policies. People need to understand that there are two kinds of dominant economists out there, progressive left leaning economists are completely different than right wing free market economists in terms of economic policy. This guy is still promoting rightwing austerity, Milton Friedman policies and trickle down economics./Supply side economics.
Firstly, a Home does not have its own currency. Secondly, he mentioned Germany bailing out the US like it did for Greece, and that it’s not going to happen, Greece does not have a time currency, but the US has its own currency so he’s talking nonsense. Finally printing money in Zimbabwe and Germany did not cause hyper inflation, the inflation started before they printed money.
Michael Pantazis
yup, he should read the deficit myth
What is the endgame? After crash, a new monetory system? What happens to debt? Will government pay it in different currency?
There is no endgame.
If they switch the monetary system, there goes all that credibility.
There is a reason bond traders make decent coin. They are essential to the systems’ survival.
there will be no crash
In 2027 we will pay over $3 trillion of interest on our national debt while bringing in $5 trillion in federal tax revenue. Our country is in big trouble.
Low interest gone
Well crap. Goodbye social security..
it'll be there
Yes it matters because it means the average person will be paying more taxes for the rest of our lives in the future
There will be more taxes, and higher taxes just look at California new shit tax, on your car mileage due to be passed
Taxing the rich is most important and leads to a ton more revenue!!!
Very american point of view. No problem that we cant fix. Nothing to see here.
QE it’s a complete Ponzi Scheme, have a look at the average house price to gold ratio in your state/country
No wonder the US is in bad shape. What will happen if China's naval fleet is equal to the US seven fleet or bigger and unilaterally demands payment in GOLD for its holdings of mature US. Treasury Bills regardless of the agreement?
It can be say if japan is third largest gdp in the world and hold 280% national debt then as the senior partner of the two USA national debt is at highh 120% is only more capable to pay off than japan. Especially when global 500 corporations, majority of them are located in the United States. We do still hold the world reserved currency and the most resilient economy of all major economy.
Largest holders of Japanese Public Debt are Japanese Citizens. Americans can’t comentar that ratio.
As for Reserve Currency Status …..Britain once held such status. It eventually lost its stronghold in the world trade.
Can’t come close to that ratio.
@@serafinacosta7118 largest holders of US debt are also americans
It does buy GOLD
Why are citizens responsible for the governments debt? We already pay taxes, shouldn't the rich politicians be responsible for the decisions they make?
they're supposed to be representing you and your interests, so when they do something, they do it in your name, the poor bastard that elected them.
Politicians use your own money. So it’s advisable to not elect politicians who encourage reckless spending
the government debt isn't something you pay for, it's something the government pays you.
Make churches pay their fair share....that would help.
Here is a guy that knows nothing about federal deficits or debt.
Sick "politics" As soon as I see somthing come back to this Country, I'll start believing the numbers. Bush JR. Said it best when he was impressed by the question called on but that was swept under the rug......
Need to increase population, and they're doing that by immigrants and also allows to up prison labor.
Fazendagagua
enjoy the decline
PS your grandchildren will be paying and not see the light.
nonsense
There is no such thing as National Debt in a fiat based currency economy, especially when petrodollars are the global standard currency. The Fed can and does print money at will and lend it out at Zero pct interest. The National Debt is a myth told to the populace to make them believe they live in a world of constant scarcity. Additionally that which is called the National Debt is merely one side of a Ledger, the other side is the US Economy, and any Debit on the National Debt side is a Credit on the US Economy side.
When a Fiat Currency Government invests its Own Currency into its Own Economy, the same Economy that Creates the Value of said Currency, how is that Spending. That is like a household putting Money in the Bank and calling that Spending. There is no such thing as a National Debt.
It's more like taking a loan on your house and refinancing it every few years to buy things you don't need because the value of house grows over time.. until it doesn't.
Go tell that to Brazilians , Germans pre WWII, Bolivians, Bolshevik Russians
There are consequences.
@@serafinacosta7118 none of the countries you mentioned had monetary sovereignty like the US does
Debt not a problem as long as u keep waging wars force countries accept your toilet papers
Pyramid scheme
I miss you Trump 😊😊😊 , biden just old man with Alzheimer's 😂😂
why are you lying?