Lets discuss the ever growing national debt, whether or not this is a concern, if it’s a bubble, and how this affects your money and investing for the future – enjoy! Add me on Instagram: GPStephan
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The United States is, at its core…kind of like a business. It has what’s called a GDP, which stands for Gross Domestic Product – and that’s the entire market value of all the goods and services produced within the United States..the purpose of this is to measure the economic output of our country, see if we’re GROWING as a society, and when that number goes up – it tells us that incomes are increasing, and people are spending more.
Now, this is important because – ALONGSIDE that GPS – includes all of that revenue that the country makes to keep itself running. After all, roads need to be built, the military needs to continue running, police and firefighters need to get paid, like buttons need to be smashed…and so on. Now, a lot of those types of services are all paid for through our tax dollars – and, just with any business, there are going to be times where there isn’t enough tax revenue to pay for all the services that we get.
Typically, this is done through issuing bonds and treasury bills – which is just a fancy way of saying: The government will pay people interest if they loan it money. And that loan is guaranteed by the United States, which – lets be real – it’s pretty much guaranteed to pay it back, so people see this as a really, REALLY safe investment.
But – in terms of who actually BUYS and OWNS this debt: here you go:
https://www.marketwatch.com/story/heres-who-owns-a-record-2121-trillion-of-us-debt-2018-08-21
So, here are a few concerns that frequently get brought up:
One: If interest rates begin to rise, the cost of holding on to that debt become more expensive. Right now, since interest rates are next to nothing…the United States holding on to $25 trillion worth of debt isn’t much of a concern. If anything, it’s BETTER to hold more debt at a time where interest rates are low…than it is to hold LESS debt when interest rates are high – just because, with low rates, that debt is cheaper to keep.
BUT…if interest rates were to be at 4%…that debt would begin draining money from other resources, and when the United States needs to figure out how to raise more cash – the worry is that they’ll do it through higher taxation.
Two: The other concern is we just carry on as usual…and then leave it up to future generations to worry about. Maybe THEY’LL be the ones that are taxed higher, maybe THEY’LL be the ones with less money spent on public services…or, we can leave it to them to keep kicking the can down a little further until our Grandkids do something about it.
In terms of whether or not we should be worried about our debt…the answer is, PROBABLY NOT.
When we look at our debt in relation to how much money we make…we’re actually a LOT lower than quite a few other countries. You can see here that, sure, we might OWE the most amount of money…but, we also MAKE quite a lot of money, as well:
https://en.wikipedia.org/wiki/List_of_countries_by_external_debt
Secondly, I think it’s assumed that the plan of action here is to keep interest rates low, and then let inflation do its thing – as long as our economy continues to grow, and innovate…that debt will just sit there, whittling away, assuming we don’t keep adding to it.
And really…because of that there’s no REASON to pay off the debt early. Why would they?
HOWEVER…where I see the biggest obstacle, is IF people stop investing in the United States, and we stop growing as fast as we have been…then the United States will be forced to pay higher interest in their debts to entice more people to lend money, and THAT – in turn – would almost certainly mean higher taxes in the future.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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If GDP increases and M2 increases, has GDP increased? Also, do a video on Monetary Velocity & M2 Supply
Holding debt is good if you are the borrower. Holding debt is problematic if you are the issuer.
National Debt vs Personal Debts have different economic consequences? Inflation vs Deflation.
For fiat currencies to sustain themselves they need exponentially ['2%' compounding] increases in debt (credit creatation) unless Personal Debts can continue to satisfy increasing debts you will have a logical deflation as people can no longer support their personal debt levels (aka maxed out)
Graham you the Man! Ive learned much from your videos on my financial journey and I love that your videos are charming, informal and transparent all in one package. Keep it up you're great! ??
In Germany the government has no debt and they are the richest country in the EU and it’s a very successful country….. tell me again why it’s not so bad for the US to have tons of debt?!
P.S. I generally like your videos and I’m mature enough to listen to your opinions, even if I find some of them ludicrous.
Hijaaaaa, good job!
Like my comment if you're a simp , dislike my comment if you're stupid , comment if you're floor gang.
This has the best and most interesting explanation of the US debt that I have seen.
I came here just to smash the LIKE button, there a hole on my monitor now
Graham has a lot of digital blood on his hand from all those like button smashed….
Cough China Cough
Best way to make a million dollars in 10 years or less with investments?
Comments:
50% sheep
25% skeptics of what was said
25% analysis of what was said
Great comment section compared to most
So is this the crash??? Today?