tv Boom Bust RT October 7, 2021 3:30am-4:00am EDT
however, in the vast expanse of russia, there is a spot where a housewife could secure regular employment status. it's in the far north celestial hmh, rama sherman. i'm in usually just filled with anonymity on the internet. the allows only been problems and much was going to invite everybody's lloyd, that wasn't a glitch. that was the feature that the people who designed the ins and that was all in got in as a feature with ah,
shoot . this is been by someone business, so you can't afford to mess. i'm ready to love it. and i bridge a boy and watch it coming up. we have a very special program for you today covering public debt. the united states has seen it skyrocket at the debt to g d p ratio. if it's highest level since world war 2 will go over. who holds that debt? and what could happen if the nation default and it's not just the u. s. global public that has risen to nearly $300000000.00 of government worldwide have injected massive amounts of stimulus into their economy in response to the coven nightstand . them it. we have the panel of economists on hand to dig into the details. let's get started with
we leave the program with the state of federal debt. here in the united states, democrats and republicans in congress started warding in september, that the debt ceiling would need to be raised above its $28.00 trillion dollar limit, or the country would risk defaulting on its debt altogether. but this fight is really nothing new. that's right, the decision to raise or change the definition of the debt ceiling has been made by congress 78 times just in the last 60 years. and while republicans have been the ones resisting it this year, the overwhelming majority of those changes have actually been made while the republican was in the white house. in fact, the national debt hasn't hit 0 since the andrew jackson administration in the 1830, but major event such as world war 2911 and the great recession has added to it significantly over the years. and many may remember when the national debt hit one trillion dollars for the 1st time back at night. in $81.00, the ronald reagan administration combined an increase in defense spending with tax
cuts. the deficit decreased slightly under the clinton administration, and it stood around 5 trillion dollars with george w bush took office, but he didn't his administration more than doubled that number. bringing to over 10 trillion dollars. president brock obama then doubled it again, raising the national debt to nearly 20 trillion dollars. now, in order to fully understand how the national that impacts the country, we have to look at where it stands compared to our gross domestic product. now last year, spending in response to the pandemic brought the debt to g d p ratio to 105 percent marking its highest points in world war 2. but if we go back to the 1990 s, we'll find that the ratio stood under 50 percent even dropping down to 30 percent under the clinton administration. the debt to g d p ratio was up to nearly 45 percent. by the time george w bush left office, and by the time obama left off, as it had skyrocketed nearly 75 percent as the continued increase in defense
spending combined with the government's response to the great recession. so who owns all of this debt? the 2 largest and these are actually right here in the united states, the social security trust fund and the federal reserve that's public. that's the debt of the people. now beyond that, china and japan both own more than one trillion dollars in us treasury securities, followed by the u. k. ireland, luxemburg and brazil. so what is the significance of all of this debt, and what would it mean at the us where to actually default with joining us now to this josh, are especially richard was host of the economic update. peter shift chief economist at euro pacific capital. and steve king, the economics professor, a patriot, it's great to have you all on the show today and professor wolf. i want to start with you. now when we look at the way the debt has grown, how we just come to expect that congress will continue to spend more as time goes on at this point. yes. and then basically we have waltzed ourselves into
a kind of corner from which it is too dangerous to try to escape. the debts are so enormous at this point, and by the way, not just a federal debt, but corporate debt, an individual household debt. that even the effort to raise interest rates a little bit becomes a risk and a shock that an already troubled economy can really not cope with. so that we are in a situation where we have to keep funding a debt, even though it becomes more dangerous as we do so. and peter, when we look at a lot of the reasons the national debt has jumped over the years, it seems there's always something whether it's the great recession, world war to a global pandemic, or even the war on terror in some capacity. do you ever see the sped it spending being justified based on current events? well, 1st of all, you know, the debt continues in good times as well as bad. we never have any surpluses when
times are good to pay off the deficits we incur when, when times are bad. but i would correct a couple of mistakes that you made earlier on with the debt. first of all, the debt to g d p. it's actually a 125 percent, not 105 percent because the 105 percent doesn't count the debt held by the social security trust funds. so when you count all the debt, that's outstanding. it's $125.00. but that doesn't even tell the whole picture, because you have to look at the state government debt and all the municipalities because everybody is looking at the same tax base to repay the debt. so when you measure all government debt in the united states, you're looking at 140 percent. 145 percent of g d p. but that's just the tip of the iceberg, because it doesn't count any of the unfunded liabilities of the united states government. those are commitments to pay things like so security or medicare benefits are guaranteed student loans. when you add all that together, you're talking about several 100 times the g, d p a. how much we we,
we run off the debt and the problem, contrary to what everybody is talking about. the problem isn't the debt ceiling. the problem is the debt. the problem is we keep raising the ceiling, so we keep on piling on more debt. now steve, i want to give you a chance to respond to that. i know we've talked about how the national debt has grown and how those figures just continue to grow. of course, when you do take the time to factor everything in, is this something that you see, it just inevitably continuing to grow, especially the way the congress is operating right now. if you want to continue having a capitalist economy, yes, it has to grow. and this is, this is the reason why i found some of this alarm quite laughable, frankly, because i'll check when a pay to seek is about the level of government id being a 145 percent of j. p. before some of the other things he added in that's actually less than the level of private debt which is running at about a 165 percent of j pay right now. and that's the real problem. personal debt is a problem. oh,
so debt does constrain what individuals can do and falls in personal debt, do coals crises, that's what we should be worrying about. we're all the stuff about government id and i'm talking specifically the federal debt here because federal debt is different to state debt. it doesn't, doesn't have anything like the same problem. in fact, as part of the reason why capitalism works, because when the government runs a deficit, it creates an identical surplus for the private sector. the government deficit is the private sectors surplus. if the government runs a surplus, the, the private sector runs a deficit. and if you know, i know this is hot when people get their heads around, but it's actually the accounting involved. and it's easily shine using accounting software. that if the government has a, spans more than it gets back in taxes, it puts more money into product bank accounts than it takes out through taxes. and the only question is, does this end up meaning the federal, the treasury has it as a negative account at the federal reserve or
a positive account at the federal reserve? that's what bon sells, a fool, and that's what the coin could be for as well as peter, i want to come back to you on this because, i mean, obviously this is a broad conversation about the state of debt that we will continue here throughout the half hour but, but the question is, what are really been negative? the down sides of holding all of this debt because it does seem like there's a lot of given taken this while the debt is a huge problem that doesn't help capitalism. it interferes with capitalism. because what happens is the government is, is taking resources away from the private sector and diverting them to public spending. and this undermines capitalism. it undermine savings and investment and all the things that we need to grow our standard of living. the problem is much of this that now is being monetized by the central bank, the federal reserve prince money to buy up all this debt. and all that is, is living a massive inflation tax on the economy. and this is only getting started. prices
are going to explode in the united states for all manner of consumer goods, especially goods, right relative to services because of the american economy. after years and years of deficits crowding out private investment, we are completely dependent on the product of capacity of the rest of the world. we are running record trade deficits just yesterday we printed the largest monthly trade deficit and u. s. history better than $73000000000.00. those deficits are going to keep getting higher and higher. and eventually, and i think relatively soon the value of our money, the dollar is going to collapse and all the prices of the imported goods are going to be going up much faster than they are right now. professor, well, i know we have pretty much the same conversation with you quite regularly about trade and what peter is talking about. what do you make peters comments there? well, i'm always mystified by peter's comments, because if this is against capitalism, he does have a problem of explaining it is everybody wrong except him? is everybody making a terrible mistake? is the system self most people?
yeah. i don't think i don't think so. i think this is a system that's got basic problems and he is trying to solve them by printing a great deal of money and exploding. it's dead. it's really solving one set of problems by this, that creation by there is monetization and then it creates a new set. and it has bumbled through for 2 or 3 centuries, doing this over and over again. and everybody kind of knows that eventually you're going to solve one problem by creating another one. and then you won't be able to solve it. and then the system will come down. that's the problem. and there american capitalism do great until the u. s. government corrupted it. we had a vibrant free market economy under a gold standard. when we had honest money where we didn't have a federal income tax or so security tax, we didn't have any of these types of spending programs that we have today. we have a thriving middle class,
we had an economy that really was the envy of the world. we built a standard of living that was unmatched. anywhere else in the world. the problems really started when government started to grow and started to impose more regulations and more subsidies and more government spending and the federal reserve came around. so these problems were not created by capitalism. they were created by governments interference with capitalism. and every time government tries to solve the problems that they create, they make those problems even worse. well steve, i want to give you a chance to weigh in on this. i know we've talked a lot about the different systems, but do you see the united states is having a free economy, especially when it's congress that is deciding to continue to add onto the national debt, which they say that we own. but the american people don't really seem to have much of a choice in the matter. oh, they even even people have a choice. they can do what happened during the not in twenties. and let's go back. i think that's reflecting, paid would admit that before government, it got to be particularly launch at that stage. government spending was about 5 percent of j pay or less, and it calvin coolidge does adriano, a surplus,
freedom child sam, and during the non in $20.00 city precisely that even a surplus of roughly one percent of jadae pay every year. and of course the economy burnt, and he took credit for it and said the setlist was the reason the economy boomed. when you look at the data carefully, what you find is, yes, there was a government surplus of one percent of charity pay every year. and every year the private sector was borrowing roughly 5 percent of j. j to speculate on the stock market. that's what gave it the turbo charged economy, not the surplus, but the government. but the deficit being that was all hello. we bought to borrow and gambled in, we finished beta, the lower and gamble on the stock market. and over that period of time, the private debt level rose the mot more margin debt. i just bought debt to boy to gamble and shares rose from what to say, pay just 13 percent of j pay and then crash right back down again. that's what i was the great depression. now that's sort of irresponsibility on the profit it saw it is the real thought of well achilles heel of capitalism and worrying about the
government's behavior is frankly identified in the wrong problem. and peter, i'm gonna give you the final worry of 30 seconds before we go to break here. yeah, the problem was the federal reserve was created in 1913. it was there, easy money, policies in the latter part of the 1920s. that inflated that stock market bubble and what it pop, what created the depression, was the intervention as policies of herbert hoover and, and then franklin delano roosevelt. that's why we had a depression was because we had too much government and we had a central bank. if we didn't have either, then we wouldn't have had a depression at all. all right, i know you're on the line to buy stock market bubble. you can shake your head, but that's, that's the fact. all right, i know we don't have to talk about here. we've got to take a quick break, but professor richard will peter ship and steve king stay right there and time now for a quick break. but when we come back, we'll take a look at the international angle. it's global debt has searched and nearly $300.00 trillion dollars. we'll bring back our panel of economists to discuss
what we've got to do is identify the threats that we have. it's crazy even foundation, let it be an arms race is on offense. very dramatic development only personally and getting to resist. i don't see how that strategy will be successful, very difficult time, time to sit down and talk with their welcome back global. that is ballooning and could lead to a catastrophic outcome with global debt rising to a new record high of nearly $300.00 trillion dollars in the 2nd quarter. what does this mean for economies around the world boom bus to co host an investigative journalists? ben swan is following the story. well, as you say, global debt now stands at a whopping and record $296.00 trillion dollars. but what's really interesting is that almost 10 percent of it,
or 19.5 trillion came about just during the corona virus pandemic. prior to the pandemic, the world's debt to g. d. p ratio rose 356 percent in 2020 up 35 percentage points from where it stood in 2019. that's according to a new report for the institute of international finance. it also found that countries saw their economy shrink, and they issued an ocean of debt just to stay afloat. but now in the battle against coven governments around the world are now more indebted than at any other point in modern history, even surpassing world war 2. not only are governments around the world spending vast sums of money to fight the pandemic, but big corporations, which have been emboldened by unprecedented government support for markets, are selling bonds like never before. all that debt now means severe cuts to public spending on health, education and social protection programs globally. the international monetary fund, belize at 35 to 40 countries are debt distressed, to find as when a country is experiencing difficulties and servicing is that such as when there is
debt restructuring. a countries falling into debt distress include tunisia, which is seen political upheaval as well as ambia and gonna, zambia was the 1st african country to the fault on debt last year during the pandemic. so how bad is it? well now it's m b a has to allocate 44 percent of its annual government revenue to creditors gonna spends about 37 percent of its national budget on debt interest payments. cameroon, spent 23.8 percent of its budget on debt payments compared to just 3.9 percent of the countries revenue on health. and all this leads the number of analysts to say that we are now in a debt super cycle. and that central banks are in a trap which could ultimately lead to a global economic collapse. for boom bust, i'm been swan for more on this. let's bring back our panel of prof, sir richard wolf, host of economic update. peter shift chief economist at euro pacific capital and steve, keen, the economics professor of patriot steve, i actually want to start with what band just mentioned there. as you see
a nation default or faith major debt, whoa is. and then there owing 44 percent of their gdp to creditors, what is that doing to them depends on whether they have their own currency or not. and whether they're running a tried surplus or not, a country running a trade surplus and that, that strikes japan as an example. there is quite capable of continuing to issue government it indefinitely. i it in, on that particular case, the japan, i think has the world record 250 percent of j. they, they is a government debt level. is the economy suffering and know on at the capital basis has been growing foster united states for most of the last 15 years and a can do it indefinitely because with a trade surplus as well, it's not selling, it's, it's bonds to foreigners and foreigners if they if they do bought those bonds, a quite happy to be paid in japanese year. and now if the problems arise for countries which are running trade deficits, which can borrow and earn currency, they're the ones who are up. you know that the other bell creek without
a paddle. ok, but when you have a country it, which is either running a trade surplus like japan or in america's case, which is unfortunately, and it should not, they is unfortunately the reserve currency for the planet that you can get away with it indefinitely. so again, we're worrying about the wrong things. now professor wolf, i mean when it comes to debt between more developed nations, it really is a delicate balance with a lot and given take. in some cases is having ongoing, national adult debt actually healthy. now in most cases, this is just a kind of continuation of old colonialism and imperialism under a slightly adjusted set of circumstances. instead of literally carrying the gold out of the country somewhere in africa, back to europe or over to the united states, or ripping off the local people to make them work for next to nothing. you are now doing it with loans. you're giving them alone,
you're greasing the wheels of the lawn with large amounts of fees and commissions. and i won't even speak about the corruption that is going on both sides. so you end up with very little of that money going into any kind of long term progressive economic growth. and so the burden of the debt is not matched. my ability to pay for it. so it becomes these crazy numbers that then just went over and this is terribly bad for these poor countries already deepens the in a qualities in the world and creates political and social instability that we will all be regretting every week and months into the future. and peter, i want to kind of make a counterpoint here that i think might, you will have a great answer to here because could this global that issue result or should it for that matter, result in a d, stabilisation of currency so much that governments and citizens will be forced to
actually rely on other means. you often talk about the gold standard, obviously on their show regularly talk about crypto currency as an alternative defeat. what do you make of all that? well, certainly, 1st of all, you know, while it's true that governments can certainly get away with having too much debt for a while. and some, you know, can do it for a long while. no government can do it indefinitely. there's always going to be a day of reckoning, but the important thing to look at to the debt is why do we have so much debt? i mean, it's not an accident. you have global central banks led by the federal reserve. keeping interest rates artificially low, and it's because in our interest rates are artificially low, that there's so much debt. and the problem to the debt is that it's not productive . you have individuals borrowing money to buy consumer goods. you have corporations borrowing money to buy back their over price stock. you don't have productive debt . what we're by investing in plant and equipment that is actually generating real
income to service and retire the debt. you have this gigantic speculative bubble. you have acid bubbles all over the place. none of this is a byproduct of capitalism. it's all because of the failure to have capitalism. if we had capitalism and sound money, we would have much higher interest rates. we wouldn't have all this debt. we'd have a much more prosperous economy, but the answer your question, yes. all of this is leading to a currency crisis that will begin in the united states as both the sovereign debt crisis and a u. s. dollar crisis. and it will only unleash rapid inflation throughout the world. and ultimately a lot of this debt is going to be inflated away. i mean, the debt can't be paid. and so most governments don't have the integrity to honestly default. and it's going to get wiped out through inflation. and then where we go in the aftermath of that is difficult to say, but the world is going to go through a very, very difficult period. because a lot of these paper, what paper wealth is going to get wiped out. so
a lot of people that think they have money invested in bonds, government bonds, corporate bonds, wherever they got, they're going to find out they have very little because the purchasing power is going to be eviscerated because the cost of living is going to serve. and you know, they, they're locked into the paper and they don't have any way to pay the higher costs. now see what your response is. i mean, i know we've talked a lot about the bubbles that are coming out. but i mean, are we facing a global crisis on the scale that peter is referencing here? i can't help thinking of what i was told once is the, the way you get punished and american jail if he really misbehaving. and that is rather giving her plight with you know, natan vegetables and, and stuff on it. i put it in a blender and blend the whole lot together. and so if a chair and a half gets ice, jak, i even though an individual units that can be taught quite delicious individually pages or in a whole lot of stuff on the belinda there. and some of it, yes is, is the serious wiring. others now is not at all the problem. in fact, it's a necessary part of
a functioning capitalist economy. we do have too much private debt. far too much that it has been used to speculate on asset process and not produce productive investment. that's quite true, but us for defaults being caused by government at the only time that happened with governance bar in a currency which is not there. and that's what's called government to false. when you look at the last 150 years, they've been roughly a 150 financial crises in different countries around the world. and every last one of them has been caused by private debt collapse. so it's private debt, which is the overall hybrid glaylock, which is on the solution. it marin relation in color. if it happens, it will be the courtesy of the supply shocks from the collapse of the global supply chain, not from what's happening with the issue because it's because they're too much money creation. that's what causes it. it's a lot of money. and peter, for the want. yeah, you are the final word here. yeah. you know, the story that peter starts with is those low interest rates at of able corporations to borrow. but why start there?
why not asked to question why the low interest rates? it was a decision of the fed to which almost everyone agreed that we were on the edges of a disastrous collapse in the, in the dot com crisis in 2000 again in the great recession of 2008 again. last year, interest rates are lowered because you would have the collapse that peter's talking about if you'd be low interest rates. but thank you for letting me just finish when you, when you solve the problem with the money. yeah, you create a new problem that is going to be perhaps even bigger than the old one, but you have to how each problem as it comes. oh we actually this is just so i think that of a gentleman. unfortunately, we are out of time in the show, this is a conversation we will have to continue sometimes to professor richard will be to ship and steve keen, the economics professor patriot, thank you so, but you both and that's it for this type was cnx site. mm.
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