While it’s true that the public debt is the private sector surplus, there’s a problem in that the public debt is widely held while private surplus is concentrated in a very few hands. Essentially it’s a transfer of public wealth to private wealth.
This is not true. Money is not wealth, and a political expansion of credit will by definintion distort actual market allocations of resources. MMT'ers ignore the basis of economics and want to mathematize everything away.
go and look at the reasons why there was a great depression, then go and study what the US government did to get out of it. Then you'll realise the obsesion with public debt is a total distraction from the real issue which is private debt.
Depressions are caused by private sector borrowing and which can't be repaid and so causing bank failures and a collapse in the money supply. Most money in an economy is created by bank lending.
As my man Gary Stevenson says “if you have a system where all the money goes to the rich, and you have no way of taxing that back, in the long run, you will bankrupt your government and your entire society”.
how exactly does the government go bankrupt when it has it's own central bank issuing money in it's own currency? please explain the logic behind that one. Who do you think creates the money in the first place?
@@schumiisking Governments may create the money. But they don't own the debt. Governments are in debt to other investors. And you can't just print money infinitely to solve that problem, without causing other even larger ones.
@@jeanlefranc3817 More like a belief in trickle down economics that the wealthy and corporations have conned many into believing through decades and hundreds of millions of dollars of propaganda.
You'd create mass job losses across the country and the economy would fall apart. As usual, the public have no clue and give the simplest answers thinking they're correct.
@@JS-rm2ws Or maybe we should just stop distorting the free market by giving tax breaks and other incentives for home buying. We don't even need to tax it, just stop subsidizing it.
The USA generates $4.9 trillion in revenue per year. Current debt is $36.6 trillion. It will take around 8 years to pay off at current tax rate. Recommended AI suggestion: Tax everyone at 100% tax rate.
@@VOLightPortal If you tax *everyone* it will take less than 2 years to pay it off, if not less time. Of course, that's assuming that the wealth hoarders don't find a way to get out of it.
Us (goverment): hey, we need more money to redistribute. Can we tax you more? Rich people: no. Take a loan. Us (goverment): oh.. okay.. * Goverment is us, everybody
Ricos en 2008: me he metido en negocios sucios y puedo arruinarme. Gobiernos: eres demasiado grande para caer, toma el dinero del estado del bienestar y compensa tus pérdidas. Al menos esa fue la situación en la Unión Europea. Disculpa por usar el español, mi inglés es muy malo y probablemente más difícil de entender que el resultado del traductor
@@richardclark2290 And lets gleefully punish them for their legitimately earned success . Thankfully , you have no power or influence to dictate your arbitrary asset target to anybody . Virtually every Western democracy has a PROGRESSIVE income tax scheme . The problem is on the spending side of the ledger .
@@bobbya51 hi bobby , nice to be chatting :) how much actual graft did they put in ? some a lt some 0 , we need a capitalist system that works we have been getting poorer for longer then at any time in capitalism now while teh richest have quadrupled their wealth , we need teh kind of taxes we had when capitalism was working and working people could afford t buy a house on 1 income
When it comes to developed nations: Because they refuse to raise taxes on those with wealth to a point which covers necessary state spending. So they borrow money from rich people and their institutions instead of taking it from them. Which means that at the end of the day the rich actually profit from lending money to governments, in the form of interest, which basically gives them a rebate on the taxes they do actually pay, and at the end of the day they end up contributing very little relative to what they make.
This is wrong, taxes have a sweetspot. Rich people might pay 20%, but if you raise the tax to 40-50%, they have the means to move their residence and income to another friendlier place and you lose that 20% revenue from them as well. Its not as easy as it seems on paper, its a bell curve, we just need a tax % which would extract the most, but bigger =/= more revenue overall.
I doubt taxing the "better off" to pay for debt accumulated by politicians lack of fiscal understanding who score from it, will bring in enough revenue to offset; its much like the adage "one cannot out exercise the mouths ability to chew"
@@MTXY91 First off, I'm not an expert, so I might be wrong. But at no point did I give a reason as to why they refuse to raise the taxes. We're all aware of how the wealthy can and do hold governments to ransom by threatening to leave altogether. Obviously that needs international solutions. I did not say, nor mean to imply, that you can raise taxes on the wealthier classes infinitely without losing a portion of your tax base. I was just proposing a theory as to why governments are so consistently dependent on taking on debt. Taxes are not high enough to cover the cost of running the state and public services, so we are utterly dependent on economic growth being at least higher than interest rates. Obviously you could cut spending, but we've seen that in most instances that doesn't fly and can be counter-productive. In fact, look at how the administrations arguing most strongly for cutting the debt and rolling back the state have consistently increased the debt in the long-term.
@@BanditBaSo what more do you want to cut? SS? Medicare? Medicaid? Military? For all the bluster around DOGE, Elon has only been tinkering around the edges. But with Trump intent on driving the international economy into the ditch, he's setting up a situation, quite consciously, whereby he will present the American public (and USG creditors) with an offer they can't refuse.
@@JamesMullarneyIsAFraud Jealousy, sure... How about everyone paying their fair share? How about we dont just look at the working class to foot the bill? The Rich are getting richer and benifit from this borrowing disproportionaly. The poor meanwile, getting poorer.
The rich pay the most amount of tax, it's not even close. Which means YOU, YOU don't pay enough. Our taxes are bang on average vs the EU so all this whining of high taxes in nonsense. Move to France or Italy or Spain and good luck paying less taxes. The rich are leaving the UK, we are 2nd in the World in losing millionaires behind China. Our net migration is losing millionaires and intelligent people like doctors etc, being replaced by useless 3rd world labour who can't speak English. But hey at least our GDP per Capita stays high because our population is growing...yeah don't care, I care about the loss of intelligence to migration. Millionaires take their money which could have been used to expand businesses etc and put that money elsewhere. We're worse off taxing the rich more.
You reckon that the people who have a track record of creating wealth should just hand it over to those who self-evidently can't manage their spending habits? PS: don't tell me it's for "public" services. It's mostly to the benefit of those on the government payroll or with government contracts. The value-for-money of the services delivered by government is very low indeed.
@@AndyRRR0791didn't American healthcare teach you how much "value-for-money" you get from private sector? Or UK's privatized electric grid? Hell, every time a government service is privatized the "value-for-money" plummets, that's just a fact established through hundreds of examples in dozens of countries all around the world in the last 60 years.
We are basically doing MMT without saying it. One aspect of MMT is capturing back excess funds when they pile up somewhere that was unintentional. We aren't doing that and it's creating huge sinks of cash in private sector, driving high real estate and all our other bubbles.
Finally found a RUclips commenter who knows about mmt. Debt largely isn't real if you owe it to yourself. Tax is for redistribution not income. Why these like "Financial times experts" don't even hint at this...
the female professor in this video (around 6th minute is wrong, she does not know (or does not want to) acknowledge on her graph (about MMT) is that NOW, the world is aging! High debt and aging is not good, a deadly combo !
@@HashFace253 Have you listened to the lady in "Where does the deficit go" and "deficits can be useful"? Because I think it runs counter to your point at them not hinting at this. There's a clear admission throughout the video that debt isn't necessarily bad, and that debt has a function to someone. It's a policy choice who it serves, but it can be for the public good. The biggest risks with debt are a debt spiral, and investor fear of a debt spiral.
We are debt slaves. We are paying debts from borrowing done in our names, without our consent for the most part. But rather than get a bill in the mail, the interest is built into every good and service we buy. We are the embodiment of debt because the cost is paid by the very lifeblood of the consumer, earned over a strictly limited time called a life. We live on a prison planet.
It's a bit annoying and unfortunate. When i was born, the national debt was $2,150 per person. Now it's over $100,000 per person. And I'm not even that old. It's truly alarming . Best advice get out of debt, make regular investments and be debt free and financially stable???
Safest approach i feel to go about it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert
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Yeah, these people don't know what they are talking about or purposely avoiding the problem. Wealth inequality is the heart of the issue. The only way the government can reduce its wealth is to tax the wealthiest people. Boom, problem solved, but guess who doesn't want that?
In the 12 years following 2008, the world built an absurdly large economy based on low, to zero, percent interest rate. The global markets and industries got addicted to free money.
15:17 That Stonybrook Professor is nuts. She doesn't account for foreigner's surpluses supporting US debt. Foreigners are not as benign as domestic savers. Japan has high government debt levels because the holders of Japanese debt are domestic savers, not foreigners. Foreign investors (re: Kyle Bass's Hayman Capital) even attempted to bet against the BOJ (Widow-maker trades) by shorting Japanese bonds. However, time and again, such speculators were crushed because domestic savers refused to be stampeded into sell positions. Italy is also able to maintain high debt levels because of domestic savers in the form of resident banks and investors. If footloose foreigners are overweight in your sovereign debt markets then, like the UK under Truss, you're screwed! I somewhat agree with Russell Napier 24:33 that governments can force debt onto its own domestic savers, but that would come at a cost. The abandonment of the free market principles that underpin capital flows i.e. the introduction of capital controls. Russell further argues that there are a lot of savings worldwide, and that's just it. It is owned by foreigners! As to abusing savers, the UK government and its resident banks are already engaged in this with suppressed savings rates. There is an argument that the inevitable destination of the escalation embedded in Trumpian tariff policies is capital controls exemplified by policies exerted by Malaysia during the Asian economic crisis. As Trump seeks to bridle the global markets for goods, then you can expect restraints on the global market for capital to follow suit. The argument goes that, if Trump seeks to tariff trade then why should the rest of the world support US debt markets with their resultant falling trade surpluses - as they've hitherto undertaken?
"domestic savers" - more than half of japans debt is held by the central bank of japan, this "domestic savers" always reads like households hold the debt (they only hold about 1%). If a central bank just buys the bonds, then foreign investors have zero power.
@@twentytoone8666 I believe I referenced my definition of "domestic savers" as resident banks and investors. By which I mean not just households but banks, insurance companies, as well as public and private pensions. While I concur with your report on central bank holdings, I would also add that those holdings are bolstered by the selling intransigence of non-central bank actors.
MMT has gained a really significant foothold in the US. She genuinely thinks there's nothing wrong with the government clipping coins to nominally improve it's financial position. If you gave her a 1 metre ruler with 110cm marks made on it, she would believe to her dying day that you'd given her a 1.1 metre ruler. Astonishing levels of braindeadness
Invest judiciously, keep a stop loss figure. Shuffle between debt and equity wherever the ratio goes too off your target. As for the target, I recommend a Ratio like this Debt % should be equal to your age in years. If you are 20, debt is 20%, reset in equity. If the market falls or rises drastically, your debt % will change, which you should rebalance to 20% and bring back equity to 80%. Thus you would have bought low or booked profit depending on if it was a crash or a bull run.
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The US economy has been kept on life support from $2 trillion/year budget deficits for nearly 2 full decades. The current transition from a debt driven economy to a private sector and more balanced federal government debt economy is going to be painful albeit necessary.
"It's politically impossible to solve" - no it's not. Tax the rich. That's how one would recover the money, increase monetary velocity, and enable the investments we need while reducing inequality. Go after the money where it is - billionaires.
Donald Trump walks into a room and says, "I’ve got the best economy, folks. It’s so good, even the numbers are *making money*." A reporter asks, “Mr. Trump, what about the deficit?” Trump grins and replies, “The deficit? Don’t worry, we’re just *rebranding* it. It’s going to be *huge*-bigger than ever!”
A Debt-based financial system rewards risk and irresponsible behavior, increases inequality and always ends in hyperinflation! A savings / sound money based system rewards responsible investing, saving and turned the US from an ex colony in 1800 into the factory of the world with the highest standard of living in the 1900-s
The U.S. economy relies on ongoing credit and debt generation for sustenance. The Federal Reserve is expected to increase the money supply, leading to further debt accumulation for the average American. So how exactly can we guard against the coming financial reset Like what are really the best strategies to make our portfolio recession proof against the incoming financial reset? I'm very worried about my $310k stock portfolio.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown
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the female professor in this video (around 6th minute is wrong, she does not know (or does not want to) acknowledge on her graph (about MMT) is that NOW, the world is aging! High debt and aging is not good, a deadly combo !
I'm planning to retire at 59 in another country outside the US that is free, safe and very cheap with a high quality of life and good healthcare. Greed has eaten up those in our economic sectors making lives of the average Americans difficult. Mr. president seems to be myopic about how to better the country and seemingly peaks interest in war topics. Taxes are heavy on the middle class while the billionaires evade this taxes. some are even given tax cuts. I could fully just rely on only my SS if I wanted to when that times arrives but l'll also have at least one pension, a 403 (b) and a very prolific Investment account with my Catalina Soto Busch my FA. Retiring comfortably in the US these days is almost impossible
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I’m planning on moving to Thailand in the next 5 years if trump’s government doesn’t do anything with the high prices of groceries and taxes What about you??
You wanna know what happens when fiscal deficits are not solved? Argentina happens. The only time we had a growing economy and stable currency were the 2000s, when we had a budget surplus.
Whenever a government (or a political party in opposition) proposes or takes actions to cut debt meaningfully, they get voted out or loose the election. People (especially the rich people and big corporations) want spending cuts by the government as long as the cuts do not impact their own finances. So, the politicians keep giving the people what they want in return for their votes.
You're blaming the wrong person. What you should be asking instead should be why is it I can't print money to pay for my loans, but the government can do that? A much smarter statement is let's force the government to get back to gold standards where governments are forced to "live within their means" and when they that your grocery bill will look much better
@@low-key4966 lol How is changing how the whole financial system is backed the smarter and simple thing to do? There are already systems in place, the wealth has cash flows, and the wealth that we can go after like land, buildings and commercial assets that generate that wealth cannot be taken with them if they threaten to leave...so the smarter and simpler thing to do is just tax the cash flows from the wealth they cannot take with them...oh and that isn't my opinion that is what experts and economists have said that can be done very easily.
@@SlayerEddyTV Governments are like households. People who say they are not seem to think they can just print money to get out of debt. But they can't. The more money you print the less value it has and the more you need to pay your debts.
@@lellyparker nations/govts with a sovereign currency (unlike the 'eurozone' nations using the 'Euro') are NOT 'like households' in any meaningful financial sense at all.
And, basically, the public debt is equal to the EXACT penny of the private surplus. This amounts to a massive wealth transfer by 'the state' to private hands. NEVER EVER forget, socialism is for the wealthy. Capitalism is reserved for the poor.
Governments around the world seem to be "addicted" to debt because borrowing has become a key tool for funding economic growth, social programs, and infrastructure projects without immediate tax hikes. Debt allows governments to cover budget deficits, respond to crises, and stimulate economies during downturns. In many cases, political leaders prefer borrowing over unpopular measures like raising taxes or cutting spending, which can lead to short-term public dissatisfaction. Low interest rates over the years have further encouraged excessive borrowing, making debt seem like a cheap and convenient solution. However, this reliance on debt can create long-term risks. High debt levels may lead to rising interest payments, leaving less money for essential services. In extreme cases, excessive borrowing can trigger inflation, currency devaluation, or even economic instability. Despite these risks, governments often continue borrowing because the consequences are not always immediate. Future administrations or generations typically bear the burden of repayment, making debt accumulation an easier short-term political decision. While responsible borrowing can support growth and development, an overreliance on debt without a solid repayment strategy can trap economies in cycles of financial dependency, making it difficult to break free from the habit.
Since the debt crisis could unleash carnage on the stock market leading to economic downturns. We need to be prepared for potential market volatility. how can I secure my $480K stock portfolio against declining?
It's a good idea to seek advice at the moment, unless you're an expert yourself. As someone who runs a service business and sells products on eBay, I can tell you that the economy is struggling and many people are struggling financially.
People often overlook the value of financial advisors until they experience the downside of emotional decision-making. I recall a few summers ago, after a difficult divorce, when I needed help reviving my struggling business. I did some research and found a licensed advisor who worked diligently to grow my reserves, even amid inflation. As a result, my reserves grew from $285k to around $720k.
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation
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Where does money come from? Money is made by banks and is issued to the world in the form of debt. Money is debt. It is not possible to grow the economy and have more money in circulation without increasing overall debt. Whether or not you believe this is sensible it is nonetheless a fact.
They're not addicted to debt... Money doesn't exist without debt... The entire economy functions on debt... We should be deconstructing the notion of money rather than pretending it's a tangible reality and debt is the problem.
Tax assets, stop cuts. Tax those who are wanting these assets. A small.1% on all assets even unrealised would help with wealth accumulation and make up for government shortfall. If someone does not want to pay tax? They can’t take the assets with them.
@@PT5684 But Richard J Murphy also suggests taxing wealth is the better solution and you cannot have any justification to say he doesn't understand taxes. What gets me is that none of those commenting made the differentiation between borrowing for revenue and borrowing for investment. The latter will create tax revenue that eventually pays back the amount borrowed, the former does not. That is the solution to anyone not indoctrinated by Monetarist theory. To those that are indoctrinated by monetarism (it may be all they learned at college) answer why, between 2010 and 2020 when interest rates hovered around zero, was inflation not going through the roof, according to monetarist theory it should have.
@@Dynasty1818 Well, what's your alternative? If we aren't redistributing wealth somehow, what's your answer? We're living in the second Gilded Age, so of course people are coming for the wealthy with pitchforks. They all got screwed, and screwed hard. If you're wealthy, do you really believe yourself to be so much more special than everyone else that you get to defacto treat them as serfs?
You can deficit spend by borrowing that money off the Rich in perpetuate while devaluing your currency to cover debt obligations or you can deficit spend by Taxing that money off the Rich to invest in the things your society actually needs creating a stronger economy for everyone without the need to deficit spend in the future.
Ever wonder why the fortunes of the top 1% and the level of public debt are so tightly correlated? There is an inverse correlation between that debt and the bottom 50%. Why isn't that question ever asked???
I totally disagree with Miss kelton we need to understand with productivity in the utilization of resources and manufacturing. With our tax system. We effectively don't need to run a deficit. We promise too much to unproductive assets. Therefore living within your means. You can grow productively
The title "Why governments are 'addicted' to debt" itself shows a fundamental misunderstanding. Governments aren't addicted to debt. They simply cannot function without it. When a government issues currency, whatever does not return through taxes remains as debt. But if all currency returned through taxes, there would be no money left circulating in the economy. Debt is therefore necessary for people to save, spend, and invest. Even debt financed consumer payments, like stimulus checks, don't automatically cause inflation. Inflation depends entirely on economic capacity. If businesses can easily increase production to meet additional demand, prices won't necessarily rise. Inflation only occurs if spending consistently exceeds what the economy can produce. (or because of supply shocks) What the video also didn't clearly address is Germany's experience. For years, the German government pursued the so-called schwarze Null policy, obsessively avoiding debt. This caused severe underinvestment in infrastructure. Bridges collapsed, schools deteriorated, and now Germany is forced into large, debt financed programs just to restore basic infrastructure.
i think people are utterly confused about what debt is, and don't understand accounting so don't see the other side of the ledger....if there was no debt there'd be no money in circulation.
Let’s cut the crap, please. The only reason there’s “concern” over national debts and deficits is because the speculative financialized economy will continue to crash and at some point governments won’t be able to save the wealth of corporations and billionaires because borrowing is too expensive, inflation is too high, and there’s no more austerity to impose. If anyone was ACTUALLY serious about the national debt we’d be raising taxes on the highest earning individuals and corporations (Their free ride on the backs of working people needs to stop). Next, they would slash corporate welfare and close tax loopholes (this amounts to trillions and only fuels the speculative bubble while hollowing out the productive working economy). They would massively invest into productive economy activity (social safety nets, education, housing, high paying productive jobs, and infrastructure). Lastly, they would regulate financial markets and reverse the rot and hollowness brought by financialization. The real goal of the deficit hawks is to maintain corporate dominance and keep working people in survival mode, so they’ll never be able to come together.
The FT literally does not understand how a fiat currency works! A national deficit is literally the same number as the national savings. If there is too much debt, and if we are addicted to deficits, then there must also be too much savings and addiction to savings. The number is the same, however you want to cut it.
it's so cool how non of the solutions FT presents to cut the deficit and pay down debt is taxing the rich, taxing wealth, and nationalizing inflationary industries
They say deficit and debt has a branding problem and these are not pejoratives and should be called better terms. Why don't we call death a new beginning, poverty a minimalistic life, extreme weather events a test of human will, war diplomacy by other means. Oh wait, we already did that. We're experts at euphemisms.
A long time ago, governments could only spend what they recieved, in tax. Because people don't like paying more in taxes, only politicians that spent wisely were elected. Then politicians realised they could just borrow and spend frivolously, then later on say "You gotta pay your taxes, we have a national debt to pay"
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If we see living standards go down the hole again, this time there will be resistance, we had enough. People is on the edge already, now is time for the rich and the corporations to pay the check.
So the government sells bonds, which are all bought up, because there's a private savings surplus. That money is then used to create government induced demand, which apparently hasn't yet caused inflation. Why not just lower taxes on income/consumption and increase taxes on wealth/income from wealth. It has the same effect on the economy, without creating public debt.
People forget or more likely don't realize that debt IS money. Without debt, there's no money. That money you have when you look at your account, that's not real. It's an IOU from the banks to you. When you take out cash via the ATM, that's a bank's debt to you. When you pay for something that's a debt from your bank to the business. When you transfer money to a friend, that's a bank's debt from one bank to another. The writing of the IOUs to banks and the central banks printing money..."well they're just printing money out of thin air". Yeah, that's how government borrowing works. People think debt and they think of their own accounts being too low or in the red so they can't get money. Government borrowing doesn't work that way.
@@SyndicShadow Money doesn't represent real assets. If it did then the price of an asset couldn't change. The function of money is to distribute assets, it is a purely relative measure, which means the % of the total money that a person has is what matters, not how many £'s a person has. The % the rich has is growing rapidly while shrinking for everyone else. That is inequality in action. Since compound interest exists, those with the biggest % can further increase their % without lifting a finger. So they can get richer without contributing to society, and that's the problem. That's the whole point of tax wealth, not work; to force the rich to keep working for their money.
@ Well, perceived worth of everything can always change even in a barter system. Any type of currency or common bartering item can indeed represent "real" value even if the values fluctuate; if it didn't represent real value, we'd not use it. How much "real value" a fiat currency has is always debatable, and I think the real problem here is that fiat currencies get so thoroughly abused. Debt in my view is often one such abuse. Kick the can down the road, short-termism, avarice, narcissism, these sorts of things aren't comorbid with the existence of currency and have always plagued the human race.
@@SyndicShadow No, money has no value. That's why the same item can be worth different amounts of money at the same time and that's why pricing an item is guesswork. It's also why 10 trillion in the bank is the same as no money in the bank if the money can't be spent. The only reason money works is because people think it has value. That's why bitcoin is worth something and other crypto coins are worth nothing even though they are equally valid mediums of trade. Also because money has no value, neither does debt, so government debt doesn't matter, government spending doesn't matter, and neither does government tax. The ONLY thing that matters is the distribution of real assets. The distribution of real assets IS the economy. Money isn't. But people don't understand this and that is why debt, tax, and spending cause problems, because people treat it like it's real. The truth is money is as real as numbers, it doesn't exist.
Australia has very little government debt; it may be in a structural deficit but that is easily resolved with some simple progressive tax hikes and cuts to the subsidies for the already wealthy. Australians pay more for their university degrees than any of the mining or gas companies do for the resources they extract.
The challenge is making that happen. Dunno about Aus, but in other parts of the world the people you need to make those changes will be punished by them, so they'll always prioritise something else
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Why on earth would someone debating national debt, not use Net International Investment Portfolio? The numbers presented is completely useless as you also need to take liquid assets into account!
First thing the Trusk government did was hand $4.5Trillion per year to the richest individuals and companies in the country. That is the exact opposite of solving the debt problem.
i'm sure giving more tax cuts to the rich and cutting back on healthcare/education/infrastructure spending will help solve this scary deficit problem /s
Kelton wants us to believe that the government is a good allocator of capital. The fact is that is simply not true based on the outcomes. The people are being laden with more and more government debt and people's wages have not increased while quality of government services in many countries has diminished. Despite what MMT'ers like Kelton want us to believe, more government spending and bigger deficits is NOT the answer! In fact, it is a primary contributor to the problem we are all suffering from.
On the flipside, what if more currency was required to facilitate more economic activity? As things stand that currency was created with debt attached, but it needn't have if there was in place a different method to align currency creation with economic needs. I don't know what that method would be.
@@lukeskirenko I believe it is a fallacy that there needs to be more money in the system to drive economic activity. Economic activity will continue regardless of the amount of money in the system. So long as it is liquid and transferable. The “issue” is that the natural state is for prices to deflate as competition and innovation drives costs down. This phenomenon is antithetical to the debt based monetary system which requires more units to be injected in the system to pay for the interest.
Honestly, I don't think there's much to be learned from this video. Just soundbites from various different "experts", often disagreeing with each other.
The government doesn't care about running up large debt because they know it will not be their responsibility to pay it back. The government will put the burden on the people to pay back the debt, through increasing taxes.
When you advocate that deeply indebted countries should borrow more for defense, etc., you forget that the current debt level is a function of investment decisions that are not profitable.
Kelton is one of the Magic Money Tree (MMT) clan. It is amazing that she gets airtime for what is a totally discredited view of monetary theory that believes that governments can't default because they can always print money and that they way to increase savings is to allow lending to expand.
Did she say that? I don't think so. And MMT describes, it does not prescribe as you are trying to do. It doesn't not say that governments *should* do anything. That's your bag.
100% agree! We have effectively being putting this dangerous theory into practice - and look at the outcomes: more interest laden taxpayers, worse government public services and wages not keeping up with productivity growth or inflation. MMT priests need to be challenged. Their ideas sound so enticing to the uninitiated, but when challenged in debate, their arguments crumble like sand.
Governments Don't Make money (Generate Profits) their only means of Income is Tax and Borrowing....Utility Services are Set by Pricing Regulators....Their JOB is to be an enabler for PRIVATE SECTOR....To Be a Government Employee is not for stability or security reasons....Its a Person Sacrficing their TIMES and SKILLS to help make their country a better PLACE....Buisnesses can always List somewhere else or HQ in a different location
It's not the GOVT directly. It's the political parties in office who go for directing spending, or selected tax cut's in the here, and now for short term political gains because they hold the account's credit card's. There is no way to hold a governing party to account because they became slippery Jacks, and can face no personnel, or collective financial ruin for their mismanagement.
They aren't addicted. Of they raise taxes and the City doesn't like it they just start dumping guilds: politics are their hostage. This is what they did with Liz truss: there saved the reader of this comment from wasting half an hour of their life
The debt that is an asset for the asset class. But only a burden on the poor & endeavour. No mention off sovereign wealth funds. All the GDP spent each year doesn't return any surplus ? Has done only briefly. The focus is clearly on America. Who are rescource rich, including labour. The get out of jail card is firing up the rescources at home. Re shore productivity to the economy, which they can. The Bonds can buy into rescource rich future industries & innovation. Even if the Global use off the dollar slips. It is very strange how confident but detached the contributors are too the functioning or not a Country is. They can just up & move to havens. Clearly the haircut too savings first doesn't apply to their debt assets. War is just a War. Collapse of a Country the best fire sale ever. Sri Lanka ! as an example. Ukraine is a much bigger proposition too carve up. The rich love the Politicians they help elect debts in Goverment. You definitely do not get that in CHINA.
I have read that tax payments to the IRS may drop by $500 billion because of a belief that the IRS will not be able to audit hardly any business or rich person.
When heavy industries in US, Europe and even Australia reached its next evolutionary point and decided to go to Asia, mainly China, they were replaced by more profitable Tech industry, particularly in US. That was the opportunity for governments to fill in their tax coffers and they missed the golden opportunity. Now the tech companies are god like and you can't make them do anything. What worries me is social unrest due to accumulation of wealth in small percentage. unfair taxes have always been, historically, the cause of huge public unrests, revolutions, civil wars....
Economics books were and are written based of an era when countries used fixed exchange rate, convertible currencies. In todays world of the 21st century we use a floating exchange rate, non-convertible currency that does not work anything like the currencies of the past. This is the fundamental error that constantly leads to wrong conclusion and then translates to wrong policies. The only way to get through this is to get into peoples thick skulls the fact that fixed and floating exchange rate currencies are not the same thing at all and are govern by totally different set of rules.
Presented with a choice between taxing corporations and the wealthy versus permitting offshore tax dodges by borrowing to keep the disadvantaged content, governments borrow.
Donald Trump stands up and says, “The economy under my leadership? It’s so great, even my hair’s got a raise!” A reporter asks, “But Mr. Trump, what about unemployment?” Trump smirks and replies, “Unemployment? It’s just *taking a break* before coming back stronger than ever-like everything I do!”
I love how Stephanie Kelton is still talking about MMT. She is correct you could finance the fed government by printing money as a Fed but that's going to cause massive inflation like it did during COVID. Her theory works on paper as she says you just increase taxs to soak up the extra money supply but that doesn't actually work because nominal tax increases are very unpopular politically and we have such complex tax laws with so many exemptions people will use to keep their tax rates similar to before. For example I am a business owner turn COVID when they printed a trillion dollars I received more money that I normally would have from the government but that did not go to my bottom line I bought equipment with it that is a tax deduction so I paid the same taxes as before but I essentially got new equipment albeit because everyone got part of the money at the same time I had to pay over MSRP for my equipment but it still was essentially free at that point. The reason why everyone finances gov with tax revenue and bonds is that the other way sinply doesnt work. The best example of a country that has tried MMT is Argentina, They simply finance the federal government there with money from their central bank while trying to increase taxes but people avoided the taxes so you just got massive inflation so they then borrow from the world Bank and default on it again and again and again. It maybe able to work in a top down authorization nation lile China but not in a democracy because significantly raising taxs isnt popular. When most people earn more money they think they actually earned it and they should be able to keep it It's just human nature if you go for making $100,000 a year they print enough money that you make $120,000 a year but they want to tax you the $20,000 you will be very angry and do everything you can to keep as much of the 20k as possible especially if you already see inflation around you.
Tax havens for the corporations should be abolished immediately,those countries they operate in “sell there products” would benefit but also make it a fairer playing for smaller mom and pop Buisnesss
Unless we start taxing massive wealth, we will be all be screwed. Shame that they didn’t touch on the point of wealth taxes at all here and its possibilities for contributing to a solution to this problem. Tax wealth, not work.
Lifeless compilation of experts' words. FT forgot to put in their own efforts to provide structure and interpretation on this inexplicably crucial issue.
It’s very easy to cut debt. Just cut social security, medicare, medicaid, and military spending. Wait, what’s that? Seniors need those SS checks to survive? Okay, so do you want to save seniors or the economy? Pick one.
The issue for Europe is a lack of affordable energy. Politicians pander to the green agenda- so simple solution - Germany buys Thorium technology from India and builds reactors instead of dodgy cars.:)
what nobody says is the obvious solution...US Government should NOT borrow anything. They have the right to just print money based on the yearly budget. nothing more, nothing less
The bond market will never collapse, the Federal Reserve can literally create money out of thin air to buy bonds on the market through Quantitative Easing. The Federal Reserve and Treasury would rather cause rampant inflation through this mechanism than let the bonds default.
While it’s true that the public debt is the private sector surplus, there’s a problem in that the public debt is widely held while private surplus is concentrated in a very few hands. Essentially it’s a transfer of public wealth to private wealth.
BINGO!!
public wealth of the many to private wealth of the few
This is not true. Money is not wealth, and a political expansion of credit will by definintion distort actual market allocations of resources. MMT'ers ignore the basis of economics and want to mathematize everything away.
Exactly
Wonderful analysis
They’re literally soft launching a Great Depression for us
Partly because no politician wants a recession while they are in office
go and look at the reasons why there was a great depression, then go and study what the US government did to get out of it. Then you'll realise the obsesion with public debt is a total distraction from the real issue which is private debt.
@@schumiiskingright! Where do they think the government investment ends up in a world where everything is privatised
bang on
Depressions are caused by private sector borrowing and which can't be repaid and so causing bank failures and a collapse in the money supply. Most money in an economy is created by bank lending.
As my man Gary Stevenson says “if you have a system where all the money goes to the rich, and you have no way of taxing that back, in the long run, you will bankrupt your government and your entire society”.
That guy is a legend, he’s doing amazing work
No he's a socialist teapot.
@@Streetonomics1I'm middling on Gary, but certainly nothing against him. What makes you dislike him so much?
how exactly does the government go bankrupt when it has it's own central bank issuing money in it's own currency? please explain the logic behind that one. Who do you think creates the money in the first place?
@@schumiisking Governments may create the money. But they don't own the debt. Governments are in debt to other investors. And you can't just print money infinitely to solve that problem, without causing other even larger ones.
For the most part, debt is the symptom of mankind’s deep wired belief that all problems will somehow disappear in the future.
hahaha
indeed
And that will be liquidated by the children they do not want or cannot afford to have
@@jeanlefranc3817 More like a belief in trickle down economics that the wealthy and corporations have conned many into believing through decades and hundreds of millions of dollars of propaganda.
By out living your problems 😅
The technical term is *Future Discounting.*
Perhaps it is time governments tax those who benefited from debt being free and driving asset inflation?
You'd create mass job losses across the country and the economy would fall apart. As usual, the public have no clue and give the simplest answers thinking they're correct.
like all the property hoarders; those who bought multiple houses on cheap credit
@@JS-rm2ws Or maybe we should just stop distorting the free market by giving tax breaks and other incentives for home buying. We don't even need to tax it, just stop subsidizing it.
The USA generates $4.9 trillion in revenue per year. Current debt is $36.6 trillion. It will take around 8 years to pay off at current tax rate. Recommended AI suggestion: Tax everyone at 100% tax rate.
@@VOLightPortal If you tax *everyone* it will take less than 2 years to pay it off, if not less time. Of course, that's assuming that the wealth hoarders don't find a way to get out of it.
As every addict says: "I can get off the drugs any time I want."
The addicts are the rich and their drug is money.
Hehehe.
The cinematography is hilarious, like I'm watching a finance-themed Avengers movie
In an attempt to deal with short attention spans.
Us (goverment): hey, we need more money to redistribute. Can we tax you more?
Rich people: no. Take a loan.
Us (goverment): oh.. okay..
* Goverment is us, everybody
Ricos en 2008: me he metido en negocios sucios y puedo arruinarme.
Gobiernos: eres demasiado grande para caer, toma el dinero del estado del bienestar y compensa tus pérdidas.
Al menos esa fue la situación en la Unión Europea.
Disculpa por usar el español, mi inglés es muy malo y probablemente más difícil de entender que el resultado del traductor
And "rich people" is anyone with more money than you hahahah
@Zordonidas no rich people are people with 10million in assets
@@richardclark2290 And lets gleefully punish them for their legitimately earned success . Thankfully , you have no power or influence to dictate your arbitrary asset target to anybody . Virtually every Western democracy has a PROGRESSIVE income tax scheme . The problem is on the spending side of the ledger .
@@bobbya51 hi bobby , nice to be chatting :) how much actual graft did they put in ? some a lt some 0 , we need a capitalist system that works we have been getting poorer for longer then at any time in capitalism now while teh richest have quadrupled their wealth , we need teh kind of taxes we had when capitalism was working and working people could afford t buy a house on 1 income
The "geniuses" who got us here aren't gonna do a dam thing. Gold is money. Everything else is credit.
"Kick the can" or "pay the Piper." You cannot make a silk purse out of a sow's ear!"
They just mentioned China’s debt and said it is staggering without providing much data.😂
Exact financial statistics in the PRC is hard to discuss, they don't release much. So we often get loose estimates.
When it comes to developed nations: Because they refuse to raise taxes on those with wealth to a point which covers necessary state spending. So they borrow money from rich people and their institutions instead of taking it from them. Which means that at the end of the day the rich actually profit from lending money to governments, in the form of interest, which basically gives them a rebate on the taxes they do actually pay, and at the end of the day they end up contributing very little relative to what they make.
This is wrong, taxes have a sweetspot. Rich people might pay 20%, but if you raise the tax to 40-50%, they have the means to move their residence and income to another friendlier place and you lose that 20% revenue from them as well. Its not as easy as it seems on paper, its a bell curve, we just need a tax % which would extract the most, but bigger =/= more revenue overall.
I doubt taxing the "better off" to pay for debt accumulated by politicians lack of fiscal understanding who score from it, will bring in enough revenue to offset; its much like the adage "one cannot out exercise the mouths ability to chew"
@@MTXY91 First off, I'm not an expert, so I might be wrong. But at no point did I give a reason as to why they refuse to raise the taxes. We're all aware of how the wealthy can and do hold governments to ransom by threatening to leave altogether. Obviously that needs international solutions.
I did not say, nor mean to imply, that you can raise taxes on the wealthier classes infinitely without losing a portion of your tax base. I was just proposing a theory as to why governments are so consistently dependent on taking on debt. Taxes are not high enough to cover the cost of running the state and public services, so we are utterly dependent on economic growth being at least higher than interest rates.
Obviously you could cut spending, but we've seen that in most instances that doesn't fly and can be counter-productive. In fact, look at how the administrations arguing most strongly for cutting the debt and rolling back the state have consistently increased the debt in the long-term.
@@sluglife9785 Taxes not high enough?? Maybe government spending is too high?
@@BanditBaSo what more do you want to cut? SS? Medicare? Medicaid? Military? For all the bluster around DOGE, Elon has only been tinkering around the edges. But with Trump intent on driving the international economy into the ditch, he's setting up a situation, quite consciously, whereby he will present the American public (and USG creditors) with an offer they can't refuse.
There are a lot of wealthy people who need to pay more taxes or have their assets seized.
Jealousy gets you nowhere
@@JamesMullarneyIsAFraud Jealousy, sure... How about everyone paying their fair share? How about we dont just look at the working class to foot the bill? The Rich are getting richer and benifit from this borrowing disproportionaly. The poor meanwile, getting poorer.
The rich pay the most amount of tax, it's not even close. Which means YOU, YOU don't pay enough. Our taxes are bang on average vs the EU so all this whining of high taxes in nonsense. Move to France or Italy or Spain and good luck paying less taxes. The rich are leaving the UK, we are 2nd in the World in losing millionaires behind China. Our net migration is losing millionaires and intelligent people like doctors etc, being replaced by useless 3rd world labour who can't speak English. But hey at least our GDP per Capita stays high because our population is growing...yeah don't care, I care about the loss of intelligence to migration. Millionaires take their money which could have been used to expand businesses etc and put that money elsewhere. We're worse off taxing the rich more.
You reckon that the people who have a track record of creating wealth should just hand it over to those who self-evidently can't manage their spending habits?
PS: don't tell me it's for "public" services. It's mostly to the benefit of those on the government payroll or with government contracts. The value-for-money of the services delivered by government is very low indeed.
@@AndyRRR0791didn't American healthcare teach you how much "value-for-money" you get from private sector? Or UK's privatized electric grid? Hell, every time a government service is privatized the "value-for-money" plummets, that's just a fact established through hundreds of examples in dozens of countries all around the world in the last 60 years.
We are basically doing MMT without saying it. One aspect of MMT is capturing back excess funds when they pile up somewhere that was unintentional. We aren't doing that and it's creating huge sinks of cash in private sector, driving high real estate and all our other bubbles.
its always true to say that but ideally we'd find a way to do this stuff that did not cost us trillions (over time) 100 billion a year :)
Finally found a RUclips commenter who knows about mmt. Debt largely isn't real if you owe it to yourself. Tax is for redistribution not income. Why these like "Financial times experts" don't even hint at this...
the female professor in this video (around 6th minute is wrong, she does not know (or does not want to) acknowledge on her graph (about MMT) is that NOW, the world is aging! High debt and aging is not good, a deadly combo !
@@HashFace253 Have you listened to the lady in "Where does the deficit go" and "deficits can be useful"? Because I think it runs counter to your point at them not hinting at this. There's a clear admission throughout the video that debt isn't necessarily bad, and that debt has a function to someone. It's a policy choice who it serves, but it can be for the public good. The biggest risks with debt are a debt spiral, and investor fear of a debt spiral.
We are debt slaves. We are paying debts from borrowing done in our names, without our consent for the most part. But rather than get a bill in the mail, the interest is built into every good and service we buy. We are the embodiment of debt because the cost is paid by the very lifeblood of the consumer, earned over a strictly limited time called a life. We live on a prison planet.
It's a bit annoying and unfortunate. When i was born, the national debt was $2,150 per person. Now it's over $100,000 per person. And I'm not even that old. It's truly alarming .
Best advice get out of debt, make regular investments and be debt free and financially stable???
Safest approach i feel to go about it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown. its important to seek the guidance of an expert
Some people underestimate the value of professional advice until they make costly mistakes. A few summers ago, after a long divorce, I needed a major push to keep my business afloat. I sought out licensed advisors and found someone highly qualified. Thanks to her guidance, my reserve has grown from $175k to $450k, despite inflation.
@@mikey43221 Do you mind sharing info on the adviser who assisted you? I would love to grow my stock portfolio and plan my retirement
@@mikey43221 I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?
Look at the rich stats! Why the rich are getting richer and government poorer? This ft video is just scratching around the problem...
Yeah, these people don't know what they are talking about or purposely avoiding the problem. Wealth inequality is the heart of the issue. The only way the government can reduce its wealth is to tax the wealthiest people. Boom, problem solved, but guess who doesn't want that?
In the 12 years following 2008, the world built an absurdly large economy based on low, to zero, percent interest rate.
The global markets and industries got addicted to free money.
For the little man, you’ll want to own everything outright, thats all that matters
If we all go down, we ALL go down.
15:17 That Stonybrook Professor is nuts. She doesn't account for foreigner's surpluses supporting US debt. Foreigners are not as benign as domestic savers. Japan has high government debt levels because the holders of Japanese debt are domestic savers, not foreigners. Foreign investors (re: Kyle Bass's Hayman Capital) even attempted to bet against the BOJ (Widow-maker trades) by shorting Japanese bonds. However, time and again, such speculators were crushed because domestic savers refused to be stampeded into sell positions. Italy is also able to maintain high debt levels because of domestic savers in the form of resident banks and investors.
If footloose foreigners are overweight in your sovereign debt markets then, like the UK under Truss, you're screwed!
I somewhat agree with Russell Napier 24:33 that governments can force debt onto its own domestic savers, but that would come at a cost. The abandonment of the free market principles that underpin capital flows i.e. the introduction of capital controls. Russell further argues that there are a lot of savings worldwide, and that's just it. It is owned by foreigners! As to abusing savers, the UK government and its resident banks are already engaged in this with suppressed savings rates.
There is an argument that the inevitable destination of the escalation embedded in Trumpian tariff policies is capital controls exemplified by policies exerted by Malaysia during the Asian economic crisis. As Trump seeks to bridle the global markets for goods, then you can expect restraints on the global market for capital to follow suit. The argument goes that, if Trump seeks to tariff trade then why should the rest of the world support US debt markets with their resultant falling trade surpluses - as they've hitherto undertaken?
"domestic savers" - more than half of japans debt is held by the central bank of japan, this "domestic savers" always reads like households hold the debt (they only hold about 1%). If a central bank just buys the bonds, then foreign investors have zero power.
Seriously. How is she even employed?
@@twentytoone8666 I believe I referenced my definition of "domestic savers" as resident banks and investors. By which I mean not just households but banks, insurance companies, as well as public and private pensions.
While I concur with your report on central bank holdings, I would also add that those holdings are bolstered by the selling intransigence of non-central bank actors.
MMT has gained a really significant foothold in the US. She genuinely thinks there's nothing wrong with the government clipping coins to nominally improve it's financial position. If you gave her a 1 metre ruler with 110cm marks made on it, she would believe to her dying day that you'd given her a 1.1 metre ruler. Astonishing levels of braindeadness
@@JeremyAlan-m8h Because she says what a lot of people want to hear.
Invest judiciously, keep a stop loss figure. Shuffle between debt and equity wherever the ratio goes too off your target. As for the target, I recommend a Ratio like this Debt % should be equal to your age in years. If you are 20, debt is 20%, reset in equity. If the market falls or rises drastically, your debt % will change, which you should rebalance to 20% and bring back equity to 80%. Thus you would have bought low or booked profit depending on if it was a crash or a bull run.
Starting early is simply the best way of getting ahead to build wealth , investing remains a priority . I learnt from my last year's experience , I am able to build a suitable life because I invested early ahead this time .
I totally agree; I am 66 years old, recently retired, with approximately $1.2 million in external retirement funds. I am debt free and have very little money in retirement funds compared to the total value of my portfolio over the past three years. To be honest, I didn't do all this alone, but with the help of a financial advisor. Having one is currently the best way to trade in the stock market, especially for people nearing retirement.
How can I reach this adviser of yours? because I'm seeking for a more effective investment approach on my savings
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Colleen Elizabeth Burns’’ for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thank you so much for your helpful tip! I was able to verify the person and book a call session with her. She seems very proficient and I'm really grateful for your guidance
The US economy has been kept on life support from $2 trillion/year budget deficits for nearly 2 full decades. The current transition from a debt driven economy to a private sector and more balanced federal government debt economy is going to be painful albeit necessary.
"It's politically impossible to solve" - no it's not. Tax the rich. That's how one would recover the money, increase monetary velocity, and enable the investments we need while reducing inequality. Go after the money where it is - billionaires.
Donald Trump walks into a room and says, "I’ve got the best economy, folks. It’s so good, even the numbers are *making money*."
A reporter asks, “Mr. Trump, what about the deficit?”
Trump grins and replies, “The deficit? Don’t worry, we’re just *rebranding* it. It’s going to be *huge*-bigger than ever!”
A Debt-based financial system rewards risk and irresponsible behavior, increases inequality and always ends in hyperinflation!
A savings / sound money based system rewards responsible investing, saving and turned the US from an ex colony in 1800 into the factory of the world with the highest standard of living in the 1900-s
The U.S. economy relies on ongoing credit and debt generation for sustenance. The Federal Reserve is expected to increase the money supply, leading to further debt accumulation for the average American. So how exactly can we guard against the coming financial reset Like what are really the best strategies to make our portfolio recession proof against the incoming financial reset? I'm very worried about my $310k stock portfolio.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown
Accurate asset allocation is crucial with an Experts guidance. I have 850k in equity, 75 cash earning 5.25 interest, 685k in roth ira, 120k in 401k, Gold and silver bars. age is 48. My advisr helped me realign my portfolio to my risk tolerance and it boomed shortly.
Please can you leave the info of your lnvestment advsor here? I’m in dire need for one
Annette Christine Conte is the licensed advisor I use and i'm just putting this out here because you asked. You can Just search the name. You’d find necessary details to work with to set up an appointment.
the female professor in this video (around 6th minute is wrong, she does not know (or does not want to) acknowledge on her graph (about MMT) is that NOW, the world is aging! High debt and aging is not good, a deadly combo !
I'm planning to retire at 59 in another country outside the US that is free, safe and very cheap with a high quality of life and good healthcare. Greed has eaten up those in our economic sectors making lives of the average Americans difficult. Mr. president seems to be myopic about how to better the country and seemingly peaks interest in war topics. Taxes are heavy on the middle class while the billionaires evade this taxes. some are even given tax cuts. I could fully just rely on only my SS if I wanted to when that times arrives but l'll also have at least one pension, a 403 (b) and a very prolific Investment account with my Catalina Soto Busch my FA. Retiring comfortably in the US these days is almost impossible
I know this lady Catalina Soto Busch, a highly respected financial analyst. I met her once at Oppenheimer, where she has built a stellar reputation for her insightful financial advice and strategic planning.
I’m planning on moving to Thailand in the next 5 years if trump’s government doesn’t do anything with the high prices of groceries and taxes
What about you??
Been debt free for two years thanks to Catalina Soto Busch. So sad to see my friends in their 40s with car loans, mortgages and credit card debt.
My sister lives in Aussie. They have good healthcare better than America. I am also moving there after I retire.
My new American Dream is to leave.
Housing costs, medical costs, and the IRS are three of the big reasons that make it so.
You wanna know what happens when fiscal deficits are not solved? Argentina happens. The only time we had a growing economy and stable currency were the 2000s, when we had a budget surplus.
Whenever a government (or a political party in opposition) proposes or takes actions to cut debt meaningfully, they get voted out or loose the election. People (especially the rich people and big corporations) want spending cuts by the government as long as the cuts do not impact their own finances. So, the politicians keep giving the people what they want in return for their votes.
Tax wealth, not work.
You're blaming the wrong person. What you should be asking instead should be why is it I can't print money to pay for my loans, but the government can do that? A much smarter statement is let's force the government to get back to gold standards where governments are forced to "live within their means" and when they that your grocery bill will look much better
@@low-key4966 lol How is changing how the whole financial system is backed the smarter and simple thing to do? There are already systems in place, the wealth has cash flows, and the wealth that we can go after like land, buildings and commercial assets that generate that wealth cannot be taken with them if they threaten to leave...so the smarter and simpler thing to do is just tax the cash flows from the wealth they cannot take with them...oh and that isn't my opinion that is what experts and economists have said that can be done very easily.
oh and low-key Governments are not like households...Look it up.
@@SlayerEddyTV Governments are like households. People who say they are not seem to think they can just print money to get out of debt. But they can't. The more money you print the less value it has and the more you need to pay your debts.
@@lellyparker nations/govts with a sovereign currency (unlike the 'eurozone' nations using the 'Euro') are NOT 'like households' in any meaningful financial sense at all.
I love this video because it's a solemn warning to governments around the world.
sadly, it is not the governments that will suffer. It is the poor people subjected to living in these nation-states who will suffer.
Wealthy avoiding taxes means government go into debt. Simple as that. FT and their billionaire friends will refuse to see it though.
Well said this is utter right wing nonsense economic propaganda
One could expropriate all billionaires and it would not change the situation
Oh dear. Is this the trailer for The Big Short 2?
Great documentary though!
it's all spilt milk, under the bridge.
When governments are no longer able to borrow money (or interest rates too high) then it might become Depression 2.0
And, basically, the public debt is equal to the EXACT penny of the private surplus.
This amounts to a massive wealth transfer by 'the state' to private hands.
NEVER EVER forget, socialism is for the wealthy. Capitalism is reserved for the poor.
As always, FT content is 10 levels higher than any others. Keep it up! Thank you
Not with Steph Kelton on it
@@Swift-mr5zi perspective is what differentiate FT from most the other media
more stupid you mean?
Governments around the world seem to be "addicted" to debt because borrowing has become a key tool for funding economic growth, social programs, and infrastructure projects without immediate tax hikes. Debt allows governments to cover budget deficits, respond to crises, and stimulate economies during downturns. In many cases, political leaders prefer borrowing over unpopular measures like raising taxes or cutting spending, which can lead to short-term public dissatisfaction.
Low interest rates over the years have further encouraged excessive borrowing, making debt seem like a cheap and convenient solution. However, this reliance on debt can create long-term risks. High debt levels may lead to rising interest payments, leaving less money for essential services. In extreme cases, excessive borrowing can trigger inflation, currency devaluation, or even economic instability.
Despite these risks, governments often continue borrowing because the consequences are not always immediate. Future administrations or generations typically bear the burden of repayment, making debt accumulation an easier short-term political decision. While responsible borrowing can support growth and development, an overreliance on debt without a solid repayment strategy can trap economies in cycles of financial dependency, making it difficult to break free from the habit.
Since the debt crisis could unleash carnage on the stock market leading to economic downturns. We need to be prepared for potential market volatility. how can I secure my $480K stock portfolio against declining?
It's a good idea to seek advice at the moment, unless you're an expert yourself. As someone who runs a service business and sells products on eBay, I can tell you that the economy is struggling and many people are struggling financially.
People often overlook the value of financial advisors until they experience the downside of emotional decision-making. I recall a few summers ago, after a difficult divorce, when I needed help reviving my struggling business. I did some research and found a licensed advisor who worked diligently to grow my reserves, even amid inflation. As a result, my reserves grew from $285k to around $720k.
This is definitely considerable! think you could suggest any professional/advisors i can get on the phone with? I'm in dire need of proper portfolio allocation
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Economics said by all the 10's: Austerity is bad, debts don't matter. Until they matter.
Where does money come from? Money is made by banks and is issued to the world in the form of debt. Money is debt. It is not possible to grow the economy and have more money in circulation without increasing overall debt. Whether or not you believe this is sensible it is nonetheless a fact.
They're not addicted to debt...
Money doesn't exist without debt...
The entire economy functions on debt...
We should be deconstructing the notion of money rather than pretending it's a tangible reality and debt is the problem.
Tax assets, stop cuts. Tax those who are wanting these assets. A small.1% on all assets even unrealised would help with wealth accumulation and make up for government shortfall. If someone does not want to pay tax? They can’t take the assets with them.
As usual the public want those higher than them taxed more, but if it was them they'd be screaming to reduce taxes.
will just make the county ininvestable, which would tank the economy
another Gary follower ....that guy does not understand taxes
@@PT5684 But Richard J Murphy also suggests taxing wealth is the better solution and you cannot have any justification to say he doesn't understand taxes.
What gets me is that none of those commenting made the differentiation between borrowing for revenue and borrowing for investment. The latter will create tax revenue that eventually pays back the amount borrowed, the former does not.
That is the solution to anyone not indoctrinated by Monetarist theory.
To those that are indoctrinated by monetarism (it may be all they learned at college) answer why, between 2010 and 2020 when interest rates hovered around zero, was inflation not going through the roof, according to monetarist theory it should have.
@@Dynasty1818 Well, what's your alternative? If we aren't redistributing wealth somehow, what's your answer? We're living in the second Gilded Age, so of course people are coming for the wealthy with pitchforks. They all got screwed, and screwed hard. If you're wealthy, do you really believe yourself to be so much more special than everyone else that you get to defacto treat them as serfs?
You can deficit spend by borrowing that money off the Rich in perpetuate while devaluing your currency to cover debt obligations or you can deficit spend by Taxing that money off the Rich to invest in the things your society actually needs creating a stronger economy for everyone without the need to deficit spend in the future.
Ever wonder why the fortunes of the top 1% and the level of public debt are so tightly correlated? There is an inverse correlation between that debt and the bottom 50%. Why isn't that question ever asked???
And your answer is???
Because rich people own the majority of the debt. It makes up their passive income.
I totally disagree with Miss kelton we need to understand with productivity in the utilization of resources and manufacturing. With our tax system. We effectively don't need to run a deficit. We promise too much to unproductive assets. Therefore living within your means. You can grow productively
The title "Why governments are 'addicted' to debt" itself shows a fundamental misunderstanding. Governments aren't addicted to debt. They simply cannot function without it. When a government issues currency, whatever does not return through taxes remains as debt. But if all currency returned through taxes, there would be no money left circulating in the economy. Debt is therefore necessary for people to save, spend, and invest.
Even debt financed consumer payments, like stimulus checks, don't automatically cause inflation. Inflation depends entirely on economic capacity. If businesses can easily increase production to meet additional demand, prices won't necessarily rise. Inflation only occurs if spending consistently exceeds what the economy can produce. (or because of supply shocks)
What the video also didn't clearly address is Germany's experience. For years, the German government pursued the so-called schwarze Null policy, obsessively avoiding debt. This caused severe underinvestment in infrastructure. Bridges collapsed, schools deteriorated, and now Germany is forced into large, debt financed programs just to restore basic infrastructure.
i think people are utterly confused about what debt is, and don't understand accounting so don't see the other side of the ledger....if there was no debt there'd be no money in circulation.
Let’s cut the crap, please. The only reason there’s “concern” over national debts and deficits is because the speculative financialized economy will continue to crash and at some point governments won’t be able to save the wealth of corporations and billionaires because borrowing is too expensive, inflation is too high, and there’s no more austerity to impose.
If anyone was ACTUALLY serious about the national debt we’d be raising taxes on the highest earning individuals and corporations (Their free ride on the backs of working people needs to stop).
Next, they would slash corporate welfare and close tax loopholes (this amounts to trillions and only fuels the speculative bubble while hollowing out the productive working economy).
They would massively invest into productive economy activity (social safety nets, education, housing, high paying productive jobs, and infrastructure).
Lastly, they would regulate financial markets and reverse the rot and hollowness brought by financialization.
The real goal of the deficit hawks is to maintain corporate dominance and keep working people in survival mode, so they’ll never be able to come together.
The FT literally does not understand how a fiat currency works! A national deficit is literally the same number as the national savings. If there is too much debt, and if we are addicted to deficits, then there must also be too much savings and addiction to savings. The number is the same, however you want to cut it.
it's so cool how non of the solutions FT presents to cut the deficit and pay down debt is taxing the rich, taxing wealth, and nationalizing inflationary industries
They say deficit and debt has a branding problem and these are not pejoratives and should be called better terms. Why don't we call death a new beginning, poverty a minimalistic life, extreme weather events a test of human will, war diplomacy by other means. Oh wait, we already did that. We're experts at euphemisms.
inflation is a tax on the poor
They are not addicted to debt. They are addicted to everyone elses resources.
A long time ago, governments could only spend what they recieved, in tax. Because people don't like paying more in taxes, only politicians that spent wisely were elected. Then politicians realised they could just borrow and spend frivolously, then later on say "You gotta pay your taxes, we have a national debt to pay"
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If we see living standards go down the hole again, this time there will be resistance, we had enough. People is on the edge already, now is time for the rich and the corporations to pay the check.
So the government sells bonds, which are all bought up, because there's a private savings surplus. That money is then used to create government induced demand, which apparently hasn't yet caused inflation.
Why not just lower taxes on income/consumption and increase taxes on wealth/income from wealth. It has the same effect on the economy, without creating public debt.
Then the lobbyists came in and “talked” them out of the idea.
People forget or more likely don't realize that debt IS money. Without debt, there's no money. That money you have when you look at your account, that's not real. It's an IOU from the banks to you. When you take out cash via the ATM, that's a bank's debt to you. When you pay for something that's a debt from your bank to the business. When you transfer money to a friend, that's a bank's debt from one bank to another. The writing of the IOUs to banks and the central banks printing money..."well they're just printing money out of thin air". Yeah, that's how government borrowing works. People think debt and they think of their own accounts being too low or in the red so they can't get money. Government borrowing doesn't work that way.
It... shouldn't be. Just because it's electronic doesn't mean the intent shouldn't be to represent "real" units.
@@SyndicShadow Money doesn't represent real assets. If it did then the price of an asset couldn't change. The function of money is to distribute assets, it is a purely relative measure, which means the % of the total money that a person has is what matters, not how many £'s a person has. The % the rich has is growing rapidly while shrinking for everyone else. That is inequality in action. Since compound interest exists, those with the biggest % can further increase their % without lifting a finger. So they can get richer without contributing to society, and that's the problem. That's the whole point of tax wealth, not work; to force the rich to keep working for their money.
Amen!
@ Well, perceived worth of everything can always change even in a barter system. Any type of currency or common bartering item can indeed represent "real" value even if the values fluctuate; if it didn't represent real value, we'd not use it. How much "real value" a fiat currency has is always debatable, and I think the real problem here is that fiat currencies get so thoroughly abused. Debt in my view is often one such abuse. Kick the can down the road, short-termism, avarice, narcissism, these sorts of things aren't comorbid with the existence of currency and have always plagued the human race.
@@SyndicShadow No, money has no value. That's why the same item can be worth different amounts of money at the same time and that's why pricing an item is guesswork. It's also why 10 trillion in the bank is the same as no money in the bank if the money can't be spent. The only reason money works is because people think it has value. That's why bitcoin is worth something and other crypto coins are worth nothing even though they are equally valid mediums of trade.
Also because money has no value, neither does debt, so government debt doesn't matter, government spending doesn't matter, and neither does government tax. The ONLY thing that matters is the distribution of real assets. The distribution of real assets IS the economy. Money isn't. But people don't understand this and that is why debt, tax, and spending cause problems, because people treat it like it's real. The truth is money is as real as numbers, it doesn't exist.
Australia has very little government debt; it may be in a structural deficit but that is easily resolved with some simple progressive tax hikes and cuts to the subsidies for the already wealthy. Australians pay more for their university degrees than any of the mining or gas companies do for the resources they extract.
The challenge is making that happen. Dunno about Aus, but in other parts of the world the people you need to make those changes will be punished by them, so they'll always prioritise something else
Except the lawmakers and their financiers are the "already wealthy" and they would rather stay that way.
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"Tradition dies hard" means that it cannot be changed. Tradition becomes addiction = traddiction.
There is no longer a need to leave Germany aside when talking about debt.
This is the ultimate reason why the bubble is going to burst! Thanks for finally talking about it!
All government debts can be paid in full. It just takes financial discipline 💪 from all of us.
Why on earth would someone debating national debt, not use Net International Investment Portfolio? The numbers presented is completely useless as you also need to take liquid assets into account!
First thing the Trusk government did was hand $4.5Trillion per year to the richest individuals and companies in the country. That is the exact opposite of solving the debt problem.
One man's debt is another man's assets, and that folks is how banks made there from you
i'm sure giving more tax cuts to the rich and cutting back on healthcare/education/infrastructure spending will help solve this scary deficit problem
/s
I was promised that all this borrowing wouldn't be a problem until the future! But this isn't the future, it's the god damned present!
Kelton wants us to believe that the government is a good allocator of capital. The fact is that is simply not true based on the outcomes. The people are being laden with more and more government debt and people's wages have not increased while quality of government services in many countries has diminished. Despite what MMT'ers like Kelton want us to believe, more government spending and bigger deficits is NOT the answer! In fact, it is a primary contributor to the problem we are all suffering from.
On the flipside, what if more currency was required to facilitate more economic activity? As things stand that currency was created with debt attached, but it needn't have if there was in place a different method to align currency creation with economic needs. I don't know what that method would be.
@@lukeskirenko
I believe it is a fallacy that there needs to be more money in the system to drive economic activity.
Economic activity will continue regardless of the amount of money in the system. So long as it is liquid and transferable.
The “issue” is that the natural state is for prices to deflate as competition and innovation drives costs down. This phenomenon is antithetical to the debt based monetary system which requires more units to be injected in the system to pay for the interest.
blaming stagnant wages on government spending is a wild take
Honestly, I don't think there's much to be learned from this video. Just soundbites from various different "experts", often disagreeing with each other.
This is why I don't borrow. All my wealth is transferred into non dollar assets as well.
This was actually superbly done.
I was very impressed.
The larger issue is that most of that government debt, especially in the US, has been used to inflate the assets of the handful of billionaires.
The government doesn't care about running up large debt because they know it will not be their responsibility to pay it back. The government will put the burden on the people to pay back the debt, through increasing taxes.
Love how some of these guys in this video are advocating of theft of the savers. Such a beneficial policy 😐
When you advocate that deeply indebted countries should borrow more for defense, etc., you forget that the current debt level is a function of investment decisions that are not profitable.
Knew this was going to be a banger from the intro. Bond vigilantes into MMT into financial repression from 0:47 to 1:00 tells the story in a nutshell.
Answer: Tax the rich!
The few rich people are already paying 50% of all taxes
Kelton is one of the Magic Money Tree (MMT) clan. It is amazing that she gets airtime for what is a totally discredited view of monetary theory that believes that governments can't default because they can always print money and that they way to increase savings is to allow lending to expand.
Biden tried MMt and we got Trump because inflation got through the roof
Did she say that? I don't think so. And MMT describes, it does not prescribe as you are trying to do. It doesn't not say that governments *should* do anything. That's your bag.
100% agree! We have effectively being putting this dangerous theory into practice - and look at the outcomes: more interest laden taxpayers, worse government public services and wages not keeping up with productivity growth or inflation. MMT priests need to be challenged. Their ideas sound so enticing to the uninitiated, but when challenged in debate, their arguments crumble like sand.
Could you share the exact minute when she said it Timothy?
Governments Don't Make money (Generate Profits) their only means of Income is Tax and Borrowing....Utility Services are Set by Pricing Regulators....Their JOB is to be an enabler for PRIVATE SECTOR....To Be a Government Employee is not for stability or security reasons....Its a Person Sacrficing their TIMES and SKILLS to help make their country a better PLACE....Buisnesses can always List somewhere else or HQ in a different location
It's not the GOVT directly. It's the political parties in office who go for directing spending, or selected tax cut's in the here, and now for short term political gains because they hold the account's credit card's. There is no way to hold a governing party to account because they became slippery Jacks, and can face no personnel, or collective financial ruin for their mismanagement.
When the Government is paying debt with credit it's fine but when I do it I get treated like a criminal
They aren't addicted. Of they raise taxes and the City doesn't like it they just start dumping guilds: politics are their hostage. This is what they did with Liz truss: there saved the reader of this comment from wasting half an hour of their life
The debt that is an asset for the asset class. But only a burden on the poor & endeavour. No mention off sovereign wealth funds. All the GDP spent each year doesn't return any surplus ? Has done only briefly. The focus is clearly on America.
Who are rescource rich, including labour.
The get out of jail card is firing up the rescources at home. Re shore productivity to the economy, which they can. The Bonds can buy into rescource rich future industries & innovation. Even if the Global use off the dollar slips. It is very strange how confident but detached the contributors are too the functioning or not a Country is. They can just up & move to havens. Clearly the haircut too savings first doesn't apply to their debt assets.
War is just a War.
Collapse of a Country the best fire sale ever.
Sri Lanka ! as an example. Ukraine is a much bigger proposition too carve up. The rich love the Politicians they help elect debts in Goverment. You definitely do not get that in CHINA.
I have read that tax payments to the IRS may drop by $500 billion because of a belief that the IRS will not be able to audit hardly any business or rich person.
It’s mind blowing that some people are against the work of DOGE.
Never trust a career politician with a credit card
FT is one legacy media co. that's actually adapted well to youtube
When heavy industries in US, Europe and even Australia reached its next evolutionary point and decided to go to Asia, mainly China, they were replaced by more profitable Tech industry, particularly in US. That was the opportunity for governments to fill in their tax coffers and they missed the golden opportunity. Now the tech companies are god like and you can't make them do anything. What worries me is social unrest due to accumulation of wealth in small percentage. unfair taxes have always been, historically, the cause of huge public unrests, revolutions, civil wars....
Economics books were and are written based of an era when countries used fixed exchange rate, convertible currencies. In todays world of the 21st century we use a floating exchange rate, non-convertible currency that does not work anything like the currencies of the past. This is the fundamental error that constantly leads to wrong conclusion and then translates to wrong policies. The only way to get through this is to get into peoples thick skulls the fact that fixed and floating exchange rate currencies are not the same thing at all and are govern by totally different set of rules.
Presented with a choice between taxing corporations and the wealthy versus permitting offshore tax dodges by borrowing to keep the disadvantaged content, governments borrow.
Donald Trump stands up and says, “The economy under my leadership? It’s so great, even my hair’s got a raise!”
A reporter asks, “But Mr. Trump, what about unemployment?”
Trump smirks and replies, “Unemployment? It’s just *taking a break* before coming back stronger than ever-like everything I do!”
I love how Stephanie Kelton is still talking about MMT. She is correct you could finance the fed government by printing money as a Fed but that's going to cause massive inflation like it did during COVID. Her theory works on paper as she says you just increase taxs to soak up the extra money supply but that doesn't actually work because nominal tax increases are very unpopular politically and we have such complex tax laws with so many exemptions people will use to keep their tax rates similar to before. For example I am a business owner turn COVID when they printed a trillion dollars I received more money that I normally would have from the government but that did not go to my bottom line I bought equipment with it that is a tax deduction so I paid the same taxes as before but I essentially got new equipment albeit because everyone got part of the money at the same time I had to pay over MSRP for my equipment but it still was essentially free at that point. The reason why everyone finances gov with tax revenue and bonds is that the other way sinply doesnt work. The best example of a country that has tried MMT is Argentina, They simply finance the federal government there with money from their central bank while trying to increase taxes but people avoided the taxes so you just got massive inflation so they then borrow from the world Bank and default on it again and again and again. It maybe able to work in a top down authorization nation lile China but not in a democracy because significantly raising taxs isnt popular. When most people earn more money they think they actually earned it and they should be able to keep it It's just human nature if you go for making $100,000 a year they print enough money that you make $120,000 a year but they want to tax you the $20,000 you will be very angry and do everything you can to keep as much of the 20k as possible especially if you already see inflation around you.
Tax havens for the corporations should be abolished immediately,those countries they operate in “sell there products” would benefit but also make it a fairer playing for smaller mom and pop Buisnesss
People want it all - free government programs and low taxes. Eat the cake, the icing, and also devour the plate !
Unless we start taxing massive wealth, we will be all be screwed. Shame that they didn’t touch on the point of wealth taxes at all here and its possibilities for contributing to a solution to this problem. Tax wealth, not work.
This was excellent. I had to stop and rewind and listen to their statements. GPT helped with understanding some of their statements.
Lifeless compilation of experts' words. FT forgot to put in their own efforts to provide structure and interpretation on this inexplicably crucial issue.
It’s very easy to cut debt. Just cut social security, medicare, medicaid, and military spending. Wait, what’s that? Seniors need those SS checks to survive? Okay, so do you want to save seniors or the economy? Pick one.
The issue for Europe is a lack of affordable energy. Politicians pander to the green agenda- so simple solution - Germany buys Thorium technology from India and builds reactors instead of dodgy cars.:)
what nobody says is the obvious solution...US Government should NOT borrow anything. They have the right to just print money based on the yearly budget. nothing more, nothing less
The bond market will never collapse, the Federal Reserve can literally create money out of thin air to buy bonds on the market through Quantitative Easing. The Federal Reserve and Treasury would rather cause rampant inflation through this mechanism than let the bonds default.