4 years since this video and the debt has almost doubled (it took America its entire 200 plus year history to rack up a 9 trillion dollar debt, it took the current administration less than 8 years to double it!)

As the debt becomes unmanageable, we'll see five things: (1) reduction in public services, (2) pressure to raise taxes, (3) significant inflation, (4) artificially low interest rates (which result in delayed retirements and more competition for jobs), (5) effective default as the govt reneges on pension and medical care promises it has made to retirees. These are the five ways that people end up paying for out-of-control govt debt.

Even @ historically low rates, our gov Creates deficits every year & the debt is also rising every year.

As it looks now, our government will only keep increasing our national debt. Other consequences aside, I would be thrilled with a forced decrease in services. I believe the only legitimate roles government should be in are law enforcement, a military, and a justice system. Going far above these few legitimate functions, purposed to protect basic civil rights, is how we got in this mess in the first place. If we ever had such a case where politicians drastically decreased these illegitimate roles, the American people would become more free and it would require them to gain more personal responsibility. That is a great side-effect.

Very honored to get a direct reply! What exactly does an "effective" default entail?

what is presented here is a 'what if' that is a near certainty interest rates returning to 6% - 8% that would mean that the interest that must be paid would consume about 1/3 to 1/2 of the entire tax base collected by the national gov't. but what if other nations and people decide that the value of the dollar is likely to drop faster than it's historical trend and interest rates are pushed to 15% ... at that point all of the taxes collected will go to paying the interest with nothing else left

Hi Antony. This is awesome. Can you by any chance do another video that focuses on the general negatives of government spending and running up the debt?

@DrReaper Except we don't usually print without issuing more bonds, so more principal debt, and more interest on that debt.

@XulChris That is true and that's why this massive accumulation of debt is so bad, but reputations are gold and if you have a bad reputation when it comes to paying back debt then if you really need the money you won't get it. From what I've heard this also hurts trade relations and commerce with other countries. Basically you become an international pariah economically. The debt needs to be paid down and soon.

@XulChris The big problem with that is if the government wants to borrow money people will be far less inclined to lend the money because they won't trust them to pay it back. If you borrow money from someone and don't pay it back and everyone knows you didn't pay it back, people will not want to lend you money in the future.

Of course. Look at the vertical axis where it says "in 2011 dollars." That means the numbers are adjusted for inflation.

In 1998, a 1 year bond returned 5.5%. In 2003, a 1 year bond returned 1.4%. In 2008, they returned 3.2%. Today, they're down to 1.1%. The harder it is to find lenders, the higher the rates must go to inspire demand. All debt winds up being "new debt" as we keep "rolling over" bonds. We never make payments towards the principle... only interest. If we were rolling over debt at rates near the 1998 level, interest payments on bonds would top $1.5 Trillion. We saw rates of over 15% in the 80's...

I hope he took into consideration currency values and inflation from the past wars, because those numbers were relatively low.

Watching this is late 2017 when the debt is now double be like... oh $h!t we screwed

@PeteKnutson We paid $454 billion in interest payments for fiscal rear 2011 (From treasurydirect . gov). So far this year (starting Oct. 1) we have spent 186 billion on interest. Treasury yields are not the same as interest payments on the national debt.

if you read the graph, it says that it is inflation adjusted to 2011 numbers

correct but the last bit is based on a misunderstanding, namley paying down debt, you cannot pay off debt in this debt based system, because you can only pay off debt by issuing more debt and offsetting current debt. (rollover) The only way the government can "payoff debt" is by the private side taking on more debt, imagine squeezing a balloon and air flowing from one part to another, this is the nature of debt. The only actual way to reduce debt is for inevtiable defaults.

Key word there is exchange, if you had gold or silver and wanted to purchase on the NYSE (not the world market). You would have to convert(exchange) that gold or silver to USD. You should be allowed to purchase in straight gold or silver.. Silver is worth less than gold but its value increases faster. 1 silver certificate (.77oz) is worth 24 bucks and some change now... while our meaningless strips of paper, are well just that.

Do you have any video explaining the forces for the big down trend on the past 30 years?

In the 1950s, the top marginal tax rate peaked at 93%. What people forget is that the rate applied to an extremely small number of people. Further, because it was a marginal rate (i.e., it only kicked in at very high income levels), the people who were subject to the 93% rate were actually paying an average rate of around 50%.

@noexcusedrummer $1t isn't enough to put towards the debt. The $1.4t of Gary Johnson isn't even enough. Gary's cut is 43% of the current budget, the amount that is borrowed each year. So even cutting $1.4t is just stopping the debt from growing.

@cikcikosman I agree about the military pullout, but neither of the other two will actually help us pay down the debt. Tax revenue, no matter what the rates are for the wealthy, have ALWAYS been around 15% of GDP, for almost a century. What we need to do is grow the GDP by making the economy more friendly to business and entreprenuers.

Are the figures on the cost of previous wars shown in current dollars?

I don't get it...the government issued bonds that pay certain %...in this case 3%...wouldn't change in interest rate affect only new debt?

This seems slightly deceptive, there are a lot of costs involved in the wars that aren't direct. The Pentagon's baseline money allocation was no doubt included, plus there are issues of money we spend on defense contractors, and while the money doesn't always go directly to the war effort, the presence of the wars definitely give us more incentive to fund Darpa or other organizations. That's not to say that the debt isn't a massive issue I just think the perspective is being thrown.

Man these videos help me learn ALLOT and have changed my perceptive of things. Thank you.

@zassounotsukushi Ron Paul plans on FIRST decreasing annual spending by $1 Trillion. After the debt is paid off, he will try to cut taxes. No other candidate has a plan to reduce actual spending on a year-to-year basis. They only discuss reducing increases, which is an oxymoron.

The federal government does not go to the open market to borrow. It borrows from the Federal Reserve Bank (FED), which is not federal, has no reserves, and it is not a bank. The FED prints digital dollars at the speed of light to monetize the US debt, and it places orders to the US Mint to print paper dollars for distribution to the various FED branches, which redistribute the paper currency to its member banks to satisfy withdrawal demands. The dollars created by the FED are counterfeit.

From what I've heard and what seems likely to me that is a very low number for the cost of Iraq/Afganistan. Does anybody have any info on those numbers they would like to share?

How does the issuer of the currency run out of money?

Question, does the Federal Reserve set the interest rates on how much the federal government borrows?

That assumes that they economy stays on good footing, which is unlikely. Through the next decade we will see a huge decline in consumer spending, and if the govt doesnt keep spending, price deflation will completely off set the increase in currency. Why would there be price deflation? Because people aren't spending. And I wonder why?

If you save money thats means that you are defering consumption for the future, that in turns means that there are more resources avaliable for now for individuals who have a high time preference and it also signals entreprenuers to invest in longer term proyects. Saving by definition is consumption in the future. The problem today is not a lack of liquidity, it is to much debt and maleinvestment.

Unless I'm misunderstanding, there is a pretty glaring flaw here; interest rate increases do not affect debt retrospectively. That means this idea of the interest rate increases applying to the whole debt is incorrect, it would only apply to the new debt (ie; the deficit).

So if I understand this right, the consequences of not being able to pay off debt is that government can no longer borrow money or keep the dollar afloat in terms of purchasing power? Does this mean that collapse would result?

You had said we could 'put such funds towards paying down' the debt. That's what I was replying to. You can't pay down the debt with borrowed money.

Actually, it is almost Greece. Greece imploded when its debt hit 120% of its GDP. Cyprus was around the same benchmark. Our debt is around 105% of our GDP.

I will note that I am sorry for your situation - medical expenses and emergencies are difficult to deal with, and I truly hope your situation (both medically and financially) will improve. I was speaking to the comment you made about credit cards being a way of life in America - and disagreeing with you on that point.

The interest rate was accepted as high because the debt was low and so the fight over the debt weren't there. There is no chance of them getting an 8% interest on a debt this big. In all your other videos you show that the competing offers will make sure of that.

did he take inflation into the account when comparing interest rate through out decades?

This video explains how interest rates will create more debt. But how does the debt affect our economy and what does it mean for the average american ad the middle class? Someone please explain for me

The free market requires no rules as such - occurring whenever two people engage in trade absent coercion. That the powerful would rather have government rules working to their benefit is not a valid criticism of the free market or, obviously, a valid reason for other rules. And unfettered supply and demand means the absence of economic intervention - not the absence of law that punishes wrongdoing.

How about you consider the effective interest rate, and not just the listed interest rate, with inflation that interest rate goes down to almost zero

But here's the big problem: bond trading. If someone has a 7 year bond with a 3.5% return and new 7 year bonds are issued with a 5% return, the people holding the 7 year bonds will try to sell them off and buy the new bonds. This causes older bonds to collapse in value, while new bonds skyrocket. Bond trading follows a paradox; high demand creates lower returns, but higher prices; lower demand creates higher returns, but lower prices. Bond bubbles work opposite of other bubbles, and burst badly.

yes BUT, the more currency you print the less it's worth thus the less interest on it.

The biggest holder of US government debt is the US Federal Reserve bank, so even if the US gold reserves are what they claim to be, either the bank or one of America's creditors (China and Japan are the 2nd and 3rd) may demand settlement of their debts denominated in gold. The total gold holdings are worth $51B. China holds $1.1T worth of US debt and very actively buying gold. They could sell those treasuries for gold and utterly destroy the USD.

there is big issue with the us borrowing money. We are about year away form default which is hyper inflation. Right now only fed buying our debt. We need to fix economy through austerity to get our manufacturing base back. the economy on meth getting tired and needs a slow withdraw it can rest so it can be strong. Resting means people save money once they save enough they invest it and expand production . only other way to get our manufacturing base back is high tariffs which stop the bleeding.

Do you do realize the US gold reserves have never been audited or that the administrator of those reserves isn't actually a US government agency. The gold, supposedly is held in Fort Knox but it is actually managed by the US Federal Reserve Bank, which is a non-US government created, corporation with private, multinational share holders?

The pdf comes from the Federal Register. It's the actual official printout of federal regulations maintained by the federal government. Proposed regulations and bills don't count (obviously). Executive orders are included. Your skepticism strikes me as odd. I'm showing you the actual list of federal regulations and you're quoting something you recall Romney saying at a campaign stop?

What bugs me about these conversations about debt is they try to scare you with these huge incomprehensible numbers and how bad it looks but the only way to actually get out from under this debt is to promote growth in the economy! Like others in the comments have said even if we cut almost half the annual budget it would only keep it from growing. which means growth that makes the debt a smaller percent of GDP is the only way out! This is why stimulus is good right now and worth short term debt

what of the true cost of things? before inflation

@XulChris I disagree it is physically impossible, but Politically yes. We'd need to do some serious cuts to most programs like Social Security and Medicare, something few are in the mood for.

yah but interest rates are practically zero right, mostly cos of the euro crisis and the perceived safety of the dollar. For every %-age point they (eventually) rise u can add 100 bill in interest. A conservative rise of just 3% would see interest payments over 500 bill/yr. Total gov income is 2 trill. That's a 1/4 of all spending. It's game over. The crisis comes when the market realizes that the Fed has no intention of raising interest rates or stopping QE. Probably in the next 2-3 yrs

Are these numbers of the previous wars taking inflation into consideration?

While the absolute numbers are frightening, the comparison witht the costs of WW II doesn't mean much since GDP was much lower in the 40s than today. Nonetheless, if rates start to rise and the mathematics of compound interest really kicks in, things will be pretty ugly.

you also have to account most of private schools are students who want to learn or parents that care about their children. not to say private schools are bad but just saying that its more will power rather than government telling me what to do.

Do the figure you give account for inflation? I hate when people give figure but don't clarify what those number mean. Thanks in advance, but please correct/mention this in the future. I can't recommend you if I have to research your figures ;)

@DrReaper less nominal value, but a higher percentage of actual spending, and a higher percentage of real wealth and value, spent on interest payments.

Unfortunate how, even today with so much awareness of this, people will still hang themselves on the card.

For sure. I guess my point was, if you are concerned about inflation, there are many ways to hedge and protect your savings by converting your dollars into assets. I lean towards the monetarist school of economics, so I think that a fiat currency is not entirely bad; i don't support a gold standard. I am no fan of the Fed system, but since the great depression they have been fairly successful at keeping unemployment down, and recessions mild. The price we pay is the ability to passively save =/

@FinallyGotATubeName This guys assertion is that the Iraq/Afghanistan War costs$138.1 billion dollars a year, multiply that number by the amount of years the war has been going on - 10 years - and I think the figure starts to look pretty accurate.

If there is no incentive for savers to save, then there is nothing for borrowers to borrow (since what borrowers borrow is the money that savers save).

I agree with 3/4 of those options, BUT I think we should cut taxes.

@StandpointCinema How about cutting 1.4 Trillion dollars of spending in the first year? Gary Johnson 2012.

true stimulus may have delay the depression but force austerity is worst than non forces austerity. Once no one willing to loan the government money than force austerity come to play and instead of slow withdraw it more sudden crash. Pay down the debt means a trade surplus which pain full at first but later make economy stronger in the long run. counties that develop trade surplus the economies get stronger a grow a larger middle class.

@drekfletch Which is exactly why Ron Paul has said time and time again, that it's "a good start." I tend to agree with that assessment.

If you had paid attention to the graph (the text at the left for the vertical axis), you would have seen that the dollars for all those wars *ARE* adjusted for inflation and are expressed in 2011 dollars. Therefore, there is *NOTHING* misleading about this video. With regard to interest rates, they are always changing. They can go up just as easily as they go down. To think the downward trend shown will continue is to be hopelessly unrealistic.

Please do.

well to be fair he's partly right. the Fed Printing money the way they do devalues the currencey and to be honest causes inflation. people have seen the problem with government recklessly printing money in germany in the 1920's when it took an enire wheelborrow of marks to buy a loaf of bread. however aside from a couple of points his arguement is rather confusing the way it's written.

I really wish he would address the idea that we owe the debt to ourselves. The real consequence of debt is that a higher fraction of future tax revenue is allocated toward payments to bond holders. That is, today's savers will control more of the future tax revenue. The question to ask ourselves is the same one corporations use to determine their debt levels. What's my return on whatever I'm going to buy with this borrowed money? If it's higher than your expected interest rate, it's the right idea. Spending on things with great returns (like some education spending and some infrastructure spending) is a great idea. Spending on wars and crop subsidies have a negative return. Even when you're done buying things that go boom, you still have wounded soldiers to care for. That's a dumb investment.

Is there a point where a government can collapse altogether if too much debt accumulates?

In my opinion this video needs to measure the costs of interest and otherwise as a percentage of the GDP of the nation at the time.

If interest rates rise, it would not effect the debt we owe at all, only new debt. If I loan the government money at a 3% interest rate, and suddenly the rate shot up to 8% (unlikely), I would not be paid an 8% interest rate. As long as interest rates remain low, we should take advantage of them and spend more, not less. Cut spending when it is expensive, spend when it is cheap.

This debt will never be repaid. Raising taxes and cutting expenses are both politically infeasible. The only alternatives left are default and inflation. Default will only happen if forced by creditors. But the politicians can control inflation. So they will try this, but the interest expense will rise faster than they can print, leading to hyperinflation. Buy gold, silver and tangible physical assets and stock food, water and supplied if you want to survive.

dude just don't. a small group of people in a resturant isn't enough to judge an entire state. for instants I live in the San Antonio/Austin metropolitan area and I've never found one person say that we should go to war. if anything they say we should stop the war because we can't afford it. heck my own grandmother the biggest conservative you would ever meet believes we shouldn't be in all these wars right now. so please don't be as ignorant as some of those people at that resturant.

I once had a reasonably educated fellow argue that debt was neccessary to a healthy economy and that you could rack up debt ad infinitum without ill consequence. I told him to try and run a business on that theory and see how that goes. He called me names and threw a tantrum. It never ceases to amaze me what kind of "shit in a bag and call it logic" passes for rational argument these days...

Last year, the government paid $223 billion for net interest on the national debt, according to wikipedia. Much lower than the $440 billion figure he gave in this video.

Who is predicting that the budget is ever balanced? Congress isn't. No congressional committee is predicting that they'll slash 800 billion in spending. The "best" budget for 2017 that was presented was the GOP House committee who's estimates put their budget at an $80,000,000 deficit. That's only 10% of our current deficit, but it includes paying $550 billion per year in interest (assuming rates don't rise in 3 years.) By then we'll be at 20.9 billion in debt, again, assuming 3% bond rates.

Wanted your input on the notion that one planned economy and spending advocate said, to the effect that none of the above matters and there is no fear of massive inflation or collapse. See his argument below: _________________________________ We need MMT like we need UBI. There is a reason why "printing" (not really) money has not led to hyperinflation. It's because we are nowhere NEAR full economy capacity. We have only begun the process of automation. Inflation is linked to the real economy, to the production of real things. It only becomes a problem when we the rate at which we create money outpaces the rate at which we produce things. This is why we are not Wiemar Germany or Zimbabwe. This is why Bernie doesn't need to answer the question, "how are you going to pay for it?" Neither does Trump for that matter, who is breaking spending records left and right. No one is ever going to pay for it, because the concept is nonsensical. Who do we pay? Ourselves? China and Japan only own 10% of the debt and it is in absolutely no one's interest that the U.S. goes bankrupt. The rest of it we "owe to ourselves." We're slowly but surely finding this out every day, as trillions of dollars are "created" on a computer, credited to accounts, and the sky doesn't fall. We are about half-way to a "Star Trek" economy complete with matter replication devices. 3-D printing, holograms and virtual reality are just the beginning. Anything that can be produced in abundance has little to no economic value. There is little if any profit to obtain from it under free market conditions - the "profits" have to come from rent-seeking policies obtained through political lobbying and the accumulation of more "debt." There is no reason it cannot be brought under an economic plan. The quantity and quality of data we posses today and the speeds at which it can be transferred make it absurd for us not to have at least a partially planned economy. The old "calculation problem" that Mises identified in socialism is no longer a problem. We have supercomputers and AI. But the rate of profit problem identified by Marx is very real - and libertarians ought to recognize that most "profit" is utterly fictitious these days, inflated in countless ways with tricks and schemes and scams designed to provide the illusion of profit. A transition to a planned economy would, ironically and actually, require LESS government - so many regulations, lobbies, boards, agencies, etc. exist to protect and regulate fake profits. Trump could dissolve them all. He could unleash the full power of the American economy by continuing and increasing the direct payments, partially nationalizing industry and planning production under the auspices of the current crisis, and slowly expand that, all while completely eliminating dependence upon China for goods vital to our national security. We will only get there when we end the culture war, and reinforce the Bill of Rights. We could have all of this peacefully, in my opinion, if we simply allow the baker to opt out of baking the gay wedding cake. But the human mind is still half animal, the monkey and reptilian parts of the brain, which craves warfare, conflict, bloodshed, and the thrill of stomping an enemy into the dirt. As long as economic progress is identified with "social justice" and all that means today, it will be stalled, and possibly only achievable through the crushing of dissent. It is unnecessary and absurd. If progressives truly are the wise and enlightened people they claim to be, they will tolerate cultural holdouts, who will cease to exist in a generation or two anyway. How important is it to make someone bake the cake, which to me is the ultimate symbolic representation of woke social justice radicalism? Learn a lesson from Marx: life determines consciousness, not consciousness life. I don't agree with that 100%, and I don't think he even meant it to be taken as an absolute. But the fact remains that for most people, life does precede consciousness, and as life changes, so does consciousness. Change peoples lives, and their thinking and habits will follow. Scold them, and it doesn't matter what else you offer. They will resist.

@markcoldren I've preorded Schiff's book. But realistically Johnson has an even smaller chance of winning in November than Paul has of being the GOP nominee. No, I think it is more important to get ready for when SHTF.

BUT when the goverment can print thay dont have to borow. BUT then that will eventely leed to high inflation and rising intrestrates.. And if thay do start to pay of the dept, the total amont off $ (credit and cash) will be lower and prises will go down, and peopel will start to save insted of invest or bye stuff = slowing economy and the FED will start printing. The point is that we are past point of no return and EVERY ONE not prepared for this will burn, and burn hard.

I'm still thinking that the government will continue to print their way out of it - when all else fail - Print. Not that this will solve anything - just cost shift as usual.

Yes, but wasn't that just an IOU? In other words, the government didn't really pay that money out to anybody. Isn't that a bit like having money in one hand and putting it into the other? Nothing has really changed.

@zassounotsukushi He plans on cutting 1 Trillion in SPENDING. His economic recovery plan has been available online since Nov. of last year I believe. It's very detailed and makes a lot of sense, at least to those who keep track on such things. In simplistic terms, the 1 Trillion saved on spending will allow us to put such funds towards paying down our national debt, thus a solution is born. We'll also need to stop printing so much money in the FED so we stop debasing the dollar too.

why do interest rates change ?

Ah, the good ‘ol days of only $15T national debt!

There isn't alot of that time available and it certainly cant be bought.

We can only argue that it is like moving money from one hand to the other if we admit that the money belongs to the government. If, as many would argue, the money actually belongs to current and future retirees and that the government is merely holding the money in trust, then the interest very much counts because it is coming out of the pockets of future retirees.

Very nicely done.

There is absolutely ZERO indication of any issue with the US borrowing money. Quite the contrary, the low rate that Treasury Bonds yield demonstrate there are still plenty who want to loan us money. You are talking about a maybe issue for far in the future. In the short term we need to fix the economy and that'll require stimulus as monetary policy has shot its bolt. Not fixing it will add more to the long term debt than any idiotic austerity now will lower it.

@lordthawkeye That makes my head hurt. I understand, and am fine with, short term dept. But long term? whooo-weee

If you're paying attention to the Federal Reserve Advisory Council and Ben Bernanke, those rates are going up soon. When? We don't know. The mortgage market raised interest rates one full percentage point in one month; which was the largest jump in history. All money markets are going to have to follow this trend. The Fed has been financing half of our budget deficit for longer than the global commodities market will allow. Inflation is out of control and the men behind the curtain know it.

What does it mean to create a crisis that causes our credit rating to fall??? What would it mean if you called all your creditors to tell them you probably can't pay versus borrowing money from a friend and paying that back? Well, you're interest rates would increase IMMEDIATELY! I noticed you mention SocSec and Medicare. What about $6 trillion in military expenses? Why do we have so much money for that? What about 3.1 billion to Israel? What about oil subsides?

If you don't believe that interest rates can shoot up, take a look at what happened in the British recession in the early 90's, which culminated in "Black Wednesday" (interest rates hit 15% ). Today, the US is in dramatically worse fiscal shape than Britain was in 1990. In the US, rates wouldn't need to rise to anything like 15%, to wreck the middle class. 8% would do the job, swiftly. And it's not a question of "if" but "when".

First, let's just look at the numbers promised by law. Medicare costs $850 billion. Social Security costs $800 billion. Income Security costs $350 billion. Interest on the national debt at the lowest possible level is $440 billion. Pensions for retired Federal employees is $225 billion. In order to balance the budget, we would need to reduce defense spending by 80% and eliminate every other program run by the federal government entirely.

@markcoldren I'm so glad you didn't say Ron Paul.

"Austerity is insanity" The problem with sustained Government debt priming is that Government spending begins to represent greater and greater amounts of total GDP. Eventually Gov becomes the chief driver of aggregate demand. At that point we are Greece, catch-22, where cutting gov spending drastically decreases demand, causing further decline in output. We don't want to get to the position where "Austerity is Insanity," the only way out at that point is collapse.This is hardly delusional =/

By unfettered free trade, I'm not talking about lawlessness. The proper role of government is to protect individual rights. In the case of trade, it's to make sure no one commits fraud. I'm being a bit redundant by saying "unfetted free trade" since free trade by definition is unfettered, free from government "tinkering", trying to create a specific economic outcome via imposing tariffs, subsidies, quotas, restrictive regulations, etc. Crony capitalism is a failure of government.

Who said that? But, saving money is by definition not using it and right now we need money injected into the economy to encourage people to buy and producers to produce.

Currently here in Canada 8.8% of our taxes go to paying the interest on our debt. Anyone who thinks government is the answer in providing services and welfare to the public, consider this: Our entire military budget is 0.99% of our taxes (about 1.3% of total government spending, including our annual deficits Trudeau insists are helping our economy he has taken from economic prosperity into a downward spiral of recession). Or, consider the cost of our healthcare, which is merely twice what we pay to the Bank of Canada to service our debt. We could add 50% of our spending on healthcare to the entire country, without increasing a dime anywhere, had he not racked up this ridiculous debt. Instead, every year, more and more of our taxes go to the bank of Canada than our services. How long before our children no longer have services at all, because they are paying the bank of Canada for the ones we took from them?