On today’s episode, Stig and Preston speak with Ed Harrison, the editor at Real Vision TV. Ed talks to us about how can the US most efficiently pay off its public debt.
Stig Brodersen (09:35):
Let’s focus on the U.S. here for a bit. Let’s talk about the public debt for the U.S., it has exceeded 136% already, and now with COVID, it’s just been growing rapidly. And you could even say it was growing rapidly before COVID. Paying down debt with current account surplus just seems unrealistic at this stage, which other options does the U.S. have available?
Ed Harrison (09:59):
The option that the U.S. has available in terms of the debt is to not pay it down, to grow out of the problem, or to have inflation erode the debt. UK, when they went into World War II, it decided, you know what, look, this is an existential crisis, we’re fighting the Nazis. We need to create armaments and have our soldiers ready and prepared to fight the Germans, we’ll do whatever it takes. And they did that. And by the time that the war was over there, they had 250% debt to GDP. This is under the Bretton Woods system, which was a modified gold standard. So ostensibly, that’s hard money. Yet, they were able to continue to pay their debts through both currency depreciation and through inflation all the way until today, without a default.
Ed Harrison (10:49):
They did have in 1976, a currency crisis, where they went to the IMF, but other than that, which was 30 years after the war, they were able to successfully deal with a mountain of debt, 250% debt to GDP, and do so successfully over decades. So the United States that’s to me, the likely outcome, that is a combination of growth, inflation, currency depreciation, will make it so that, that debt load as a percentage of GDP is lower 10, 20, 30 years down the line. What’s interesting is that at least in the short term, we could see a pop in terms of growth coming back to levels that are better than the so-called secular stagnation that we’ve seen, because lower for longer in terms of interest rates is a result of the fact that real growth has been very poor in the United States and elsewhere.
Subscribe to We Study Billionaires podcast show: https://link.chtbl.com/WSB
To access our show notes, courses or forums, go to theinvestorspodcast.com.
⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤
ADDITIONAL INVESTING RESOURCES:
Ask the Investors: https://www.youtube.com/playlist?list=PL_xlkwLDH1F8msJn1pD3z95KuFLQWPuf-
Asset Allocation Course: https://www.youtube.com/playlist?list=PL_xlkwLDH1F9coxc1aExB8xbw9daFDF6P
Real Estate Investing: https://www.youtube.com/playlist?list=PL_xlkwLDH1F_p00VYv3psJ8rhDAGOvR5W
Millennial Investing: https://www.youtube.com/playlist?list=PL_xlkwLDH1F-NVcnR47rMkT0ByTWQBvBf
⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤
Download Stig & Preston’s 1-page checklist for finding great stock picks: https://www.theinvestorspodcast.com/form-youtube-checklist/
Have a question? Get your voice heard on the show: https://www.theinvestorspodcast.com/your-questions/
⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤ ⏤
DISCLAIMER: This show is for entertainment purposes only. Before making any decisions consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.
source