What Value Investing with Sven Carlin, Ph.D. said in this video:
- OtherneutralThe host notes that unlike an individual, the US government can currently run 5%, 6%, and now 7% deficits and make it work because it can print money and borrow.Source
- Bonds & Ratesneutrallong-termThe host states that as interest rates and the debt load rise, the US interest expense on the debt will climb from $1 trillion to $2 trillion within a few years, becoming a heavy burden.Source
- Otherneutrallong-termThe host argues that US debt levels may be unsustainable, but the more important issue is the cost of servicing the debt and its opportunity cost; rather than whether the debt is sustainable, rising interest expenses crowding out other spending is the key problem.Source
- Otherneutrallong-termThe host emphasizes that the key problem with the debt is opportunity cost: massive interest payments to foreign holders such as China and Europe crowd out other fiscal spending like education, defense, healthcare, and pensions.Source
- Otherneutrallong-termThe host argues that debt initially fuels faster economic growth, but as debt accumulates and crowds out other spending, economic growth slows over time.Source
- Otherneutrallong-termThe host says he does not think the US will default, but as debt servicing costs rise, the issue has become a major problem.Source