Lets discuss the $30 Trillion Dollar US Debt, why the Federal Reserve is raising rates, and how this could be a problem for the future of the market - Enjoy! Add me on Instagram: GPStephan
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THE DOLLAR MILKSHAKE THEORY:
This is based on the fact that - the US dollar serves as the reserve currency for the entire world.
However, as other countries begin to slow down, relative to the United States, their currencies DECLINE in value, making it more expensive to pay for good and services in US dollars…right at a time where they can least afford it. It’s called a “Milkshake Theory” because - in this scenario - the US would extract more dollars from around the world, resulting in cascading defaults throughout every other large economy.
All of that is to say that - people are borrowing more, to pay for products and services that cost more, and - if the economy enters a sharp, and sudden recession - DURING a time where interest rates are going UP - people may have a MUCH MORE difficult time paying down their debts.
Effectively, borrowing can only be sustained for so long until - eventually - it’s going to result in a time in which people begin to cut back…substantially. In fact, JP Morgan just recently came on record to say that “they’re bracing themselves and we’re going to be very conservative with our balance sheet” - while, at the same time, banks become WAY more careful in terms of who they lend money to.
On the one hand, in terms of our own National Debt - some experts say that - when you look at our debt, in relation to how much we MAKE - it’s actually NOT that bad, and we’re actually quite a lot lower than many 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.
HOWEVER…others say that this debt is a a massive issue…because, over the next three decades…it’s projected to increase past 200% of GDP…at the same time when “interest payments” would be the single largest US Expense. At that point, social programs and spending would be severely reduced - and, we’d be forced to go further and further into debt, hurting our entire economy as resources dry up.
That’s why - we’re in a weird spot. On the one hand, The National Debt isn’t an urgent issue - and, it could be easily swept under the rug for another few decades…BUT…we ALSO can’t have an economy with perpetual 8% inflation…so, there’s no other choice but to raise interest rates, shock the market, and then - hope that demand will eventually match supply.
So, in terms of what to PRACTICALLY DO…realistically, it’s best to stay away from ANY AND ALL CONSUMER DEBT, avoid variable interest rate loans, and ALWAYS do your best to save at least 20% of your income. This should put you in a better position to weather any economic uncertainty, and continue investing during a time where prices are lower.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
GET YOUR FREE STOCK WORTH UP TO $1000 ON PUBLIC & READ MY THOUGHTS ON THE MARKET - USE CODE GRAHAM: http://www.public.com/graham
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GET MY WEEKLY EMAIL MARKET RECAP NEWSLETTER: http://grahamstephan.com/newsletter
The YouTube Creator Academy:
Learn EXACTLY how to get your first 1000 subscribers on YouTube, rank videos on the front page of searches, grow your following, and turn that into another income source: https://the-real-estate-agent-academy.teachable.com/p/the-youtube-creator-academy/?product_id=1010756&coupon_code=100OFF - $100 OFF WITH CODE 100OFF
THE DOLLAR MILKSHAKE THEORY:
This is based on the fact that - the US dollar serves as the reserve currency for the entire world.
However, as other countries begin to slow down, relative to the United States, their currencies DECLINE in value, making it more expensive to pay for good and services in US dollars…right at a time where they can least afford it. It’s called a “Milkshake Theory” because - in this scenario - the US would extract more dollars from around the world, resulting in cascading defaults throughout every other large economy.
All of that is to say that - people are borrowing more, to pay for products and services that cost more, and - if the economy enters a sharp, and sudden recession - DURING a time where interest rates are going UP - people may have a MUCH MORE difficult time paying down their debts.
Effectively, borrowing can only be sustained for so long until - eventually - it’s going to result in a time in which people begin to cut back…substantially. In fact, JP Morgan just recently came on record to say that “they’re bracing themselves and we’re going to be very conservative with our balance sheet” - while, at the same time, banks become WAY more careful in terms of who they lend money to.
On the one hand, in terms of our own National Debt - some experts say that - when you look at our debt, in relation to how much we MAKE - it’s actually NOT that bad, and we’re actually quite a lot lower than many 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.
HOWEVER…others say that this debt is a a massive issue…because, over the next three decades…it’s projected to increase past 200% of GDP…at the same time when “interest payments” would be the single largest US Expense. At that point, social programs and spending would be severely reduced - and, we’d be forced to go further and further into debt, hurting our entire economy as resources dry up.
That’s why - we’re in a weird spot. On the one hand, The National Debt isn’t an urgent issue - and, it could be easily swept under the rug for another few decades…BUT…we ALSO can’t have an economy with perpetual 8% inflation…so, there’s no other choice but to raise interest rates, shock the market, and then - hope that demand will eventually match supply.
So, in terms of what to PRACTICALLY DO…realistically, it’s best to stay away from ANY AND ALL CONSUMER DEBT, avoid variable interest rate loans, and ALWAYS do your best to save at least 20% of your income. This should put you in a better position to weather any economic uncertainty, and continue investing during a time where prices are lower.
My ENTIRE Camera and Recording Equipment:
https://www.amazon.com/shop/grahamstephan?listId=2TNWZ7RP1P1EB
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness @gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/
's up guys. It's graham here so first of all i am shocked that that more people aren't talking about this because we are about to face the us. Debt crisis in history and instead of addressing the problem head on we're putting up statues of walther white and jesse pinkman in albuquerque. Okay.
That's actually not a bad. Idea but in all seriousness as of. Now the us. Has amassed a staggering 30 trillion dollars of national debt credit.
Card balances are increasing the personal savings rate has fallen to its lowest level since 2013 and at some point experts are saying. It has to come to an end after all for the last 20 years. The federal government has operated on a perpetual deficit. Where they continually spend more money than they take in but now that the federal reserve is beginning to reverse course this national debt is about to become a major problem throughout our entire economy.
And almost no one is speaking about it so let's talk about the severity of what's happening. Why the us dollar continues getting more expensive the impact. This is about to have on everyone watching and then most importantly how you could use this information to make you money since after all this is a personal finance channel. And all of this is for entertainment purposes.
Only because i'm just some dude making youtube videos from a half converted garage. So thank you guys so much and now with that said. Let's begin all right so in order to understand what's going on. And why there's a growing concern.
We need to discuss the national debt. This refers to the total amount owed by the united states and in just the last three years alone. It's increased the staggering 35 percent faster than any other time in history. Now at this point.
I'm sure most people would question. But graham. Why do we need to have a debt like this to begin with after all you would think that in a perfect world with an economy as big as the us they would just pay for things in full when they could afford them. But uh that's not happening.
See the united states is at its core kind of like a business. It has what's called the gdp. Which stands for gross domestic product. And that is the entire market value of all the goods and services produced within the country the purpose of this is to measure our economic output.
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 money. But on the flip side. Though when that number goes down like it is right now. It shows us that our economy is contracting demand is slowing down.
And the prices could fall. Now. This is really important because alongside the gdp includes all the revenues. The country has to make to keep itself running after all roads need to be built the military needs to keep running police and firefighters have to get paid and up to a hundred dollars for the free crypto needs to be claimed down below in the description. When you sign up for ftx us using the code gram okay the last part has nothing to do with our economy. But a lot of those other services are paid for through taxes. Which amounted to just over four trillion dollars last year. Although there's been a shortfall in terms of how much the government makes and how much they spend and that's where we go into debt of which last year alone we spent two trillion dollars.
More than we took in although in terms of who actually buys and owns the debt. It's rather interesting or at least. It's interesting for me because i'm weird as you're about to see 23 trillion dollars of the national debt is owned by the public which includes foreign state and local governments us. Banks individual investors pension funds and insurance companies.
The other seven trillion dollars is owned by the country itself funded by government programs and services that take in more money than they spend now all of this is really important to mention up front since in order to understand why this is becoming such a big problem you have to understand where that money is being owed. Because it's about to become a lot more expensive let me explain up until now the cost of maintaining the national debt was actually fairly affordable all things considered when interest rates were at record lows. The united states was able to borrow money essentially for free and then let the power of inflation slowly reduce that number it would be no different than borrowing money to one percent interest rate. And if inflation is three percent.
All of a sudden not paying off the loan makes you a two percent profit. Except now interest rates are beginning to go up and the entire economy is about to be turned upside down see on the surface. Achieving a neutral interest rate has one really bad side effect a recession in fact. A former federal reserve.
Senior staff member pointed out that an economic downturn followed every single time. The fed matched interest rates with inflation. The only exception occurred in 1994 during a productivity boom. Giving credibility that the only way to tame inflation is with a recession shock as a result.
The managing director of the international monetary fund warned of a complete global debt crisis as banks raise rates debt costs more and all of a sudden other countries can't afford to pay the costs for goods and services that we produce this means inflation increases while growth declines. I know this sounds kind of complicated but once you hear this out it's going to be pretty eye opening. This is what's referred to as the dollar milkshake theory. Yes seriously they named one of the scariest aspects of economic doom.
And gloom after a milkshake. But i digress the dollar milkshake theory is based on the fact that the us dollar. Serves. As the reserve currency for the entire world this means that every country trades in us. Dollars. Because of its stability resiliency and global acceptance. After all imagine getting paid in somalian. Colorful coins.
While then trying to convert that back into your native currency. It would be a hassle so instead. We have a reserve currency that the entire world transacts with however currencies like the us dollar. Don't just hold the same value every single day.
Sometimes our dollar will fluctuate against other currencies as they print. More we print. More they have more demand. We have more demand and in a normal market the economy tends to balance itself out.
However as other countries begin to slow down relative to the united states their currencies decline in value making it more expensive to pay for goods and services with us dollars during a time where they could least afford it and it's called a milkshake. Theory because in this. Scenario the us. Would suck up dollars from around the world resulting in cascading defaults throughout every other large economy.
Why did the dollar get so strong you might ask well the answer is pretty simple so you can finally go on that european vacation. You've always wanted to go on just kidding. It's because the united states is raising their interest rates faster than the rest of the world. And when you have one country who's paying more demand goes up and the us dollar becomes slightly more valuable relative to every other.
Currency there's also the belief that the us is seen as a safe haven asset and during times of economic uncertainty. It's a good place to park some extra cash. Although with all of that out of the way you're probably wondering. But graham why should i even care plus.
I'm on a diet. So i don't even drink milkshakes and yeah me too. Although here's how it's going to affect you in terms of the average american. We gotta have a sit down talk because it's getting serious monthly car payments have just recently crossed an average of 700 a month for the first time ever with the number of people spending a thousand dollars a month or more having doubled in just the last year credit card usage is also increasing with banks issuing.
28. More credit than they did at the same time last year. Even worse. But during the same time that credit card debt ballooned to a record high.
It was found that only 45 of credit card users paid their bill in full while the other 55 were stuck paying an average interest rate of 173 percent student loan debt isn't any better either with the average balance sitting at just over 37 000. At the same time that mortgage debt increases from rising home values. And if the economy enters a sharp and sudden recession during a time. Where interest rates are going up.
People may have a much more difficult time paying down their debts in fact. Jp morgan just came on record to say that they're bracing themselves. And we're going to be very conservative with their balance sheet. Well banks become way more careful in terms of who they lend money to that just means in the big picture. There's less money to spend and save for the average american where a higher percentage of their income goes. Towards paying off higher interest rates accumulated during a time where everything was good in terms of our economy. In a recession. Though.
The analyst expectations are extremely mixed on the one hand. Some experts say that when you look at our debt in relation to how much money we make we're actually not that bad and we're actually quite a lot lower than many other countries. We could see here that yeah sure we might owe the most amount of money. But we also make quite a lot of money as well and when you factor in how much money we take in look.
We're right there from this perspective. It would be like someone taking out a 30 million dollar mortgage. Which to some people sounds crazy until you realize that person is worth 128 million dollars. And makes four million dollars a year in fact.
This is an actual example of the united states with the exact same ratio just minus a few zeros so the amount of debt that we're taking on relative to how much we're worth is relatively small and some economists. Even say that it won't be a problem until it becomes 150 percent of our gdp. However. Others say that this debt is a ticking time bomb.
Because over the next three decades. It's projected to increase past 200 percent of gdp at the same time that interest payments would be the single largest us. Expense at that point social programs and spending would be severely reduced. And we'd be forced to go further and further into debt.
Hurting our economy as resources dry up. That's why we're in a weird spot. Because some experts believe the national debt is not an urgent issue and it can easily be swept under the rug for another few decades. But we also can't have an economy with perpetual eight percent inflation.
So there's really no other choice other than to raise interest rates shock. The market and then hope eventually the demand matches supply so in terms of my own thoughts about this is an armchair economist who talks in front of the camera. All day. I'll admit.
It's a really difficult problem that probably is not going to be solved anytime soon. In terms of a more immediate side effect. I am absolutely seeing a situation where demand is slowing down. Because people believe the economy is getting worse.
So it almost becomes like a self fulfilling prophecy. Where people hold off from making big purchases. Because of economic uncertainty. Which in turn results in lower prices and even more economic uncertainty.
I also believe that at some point. We're going to see increased taxes to help bridge the gap between how much the us makes and how much they spend like as of now we're spending two trillion dollars. More than we make and when social security funds are quickly running out of money. The only immediate solution is to tax more to pay for it of course. This also poses a threat that higher taxes will discourage growth innovation and investment with a recent study finding that a one percent of state gdp tax decrease for the bottom ninety percent of earners increases state gdp by six point six percent now realistically we're probably just going to see a blend of everything while demand slows down inflation is reduced. The national debt is pushed off a little bit longer and taxes are marginally increased. But it's definitely not a good situation to be in and only time is going to tell how this plays out so in terms of what you could practically do realistically stay away from any and all consumer debt. Avoid variable interest rate.
Loans and always do your best to save at least 20 percent of your income. This should put you in the best position possible to weather any economic uncertainty and continue investing during a time where prices are lower. This is also why it's such a good idea to diversify and spread your investments as much as possible whether that be through index funds real estate cash small amount of cryptocurrency or that pokemon collection you've been eyeing on ebay this way no matter. What happens you're always going to have something to fall back on and when you invest in the entire worldwide economy.
You're going to be in the best position possible to see stable consistent long term returns. So with that said. You guys. Thank you so.
Much for watching also feel free to add me on instagram and don't forget to get your free stock down below. In the description. When you sign up for public. Using the code.
Graham. Because that could be worth all the way up to a thousand dollars. And you can also get all the way up to a hundred dollars worth of free crypto. When you sign up for ftx us also down below in the description with a good gram.
Enjoy thank you so much for watching and until next time.
Really good info….cutest graphics!😀👍
The public ad was the best
❤ Graham is very entertaining !!🤣 And wise 🦉 He explains things so my college kids can kinda "get it"😋👍
Great video…what’s with all the hate…do you guys need a trigger warning for someone speaking truth about reality?
Unsubscribed. Stop making videos like this. You're losing credibility with me.
Kevin was right eh
WHY the clickbait ???
You’re starting to sound like a broken record. So if tomorrow you could make a Ford GT video that would be great.
You may want to create a video on the Voyager bankruptcy and freezing of all accounts
Let Americans suffer paying their hefty debts. 😈😈😈 Will be very happy to see them like this. Poor Americans 💩
The funny thing is, the result of all this debt is opposite of their expectations. They expect people like me to stay in the states and suffer indentured servitude for education and healthcare. In reality, we do all we can to escape it and end up contributing less or nothing to the country's economy. The end result is people of my generation leave the country to take advantage of COL and foreign exclusion tax laws, while investing all our extra income rather than paying the debt. 20 years of minimum payments while living abroad and a fat paycheck to the IRS is better and cheaper than staying in the states and suffering for life.
" If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around(these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." THOMAS JEFFERSON
ENDTHEFED
Yeah. We're screwed. Not Ukraine screwed. Just old timey screwed.
These guys are main reason for recession. They just hype it without any need so people panic, overselling happens and then they come and buy at dirt cheap prices from commoners. He is increasingly sounding same. They want to take all power from govt so they can do what they want without any consequences. SAD
The world trades in the US dollar because of oil. Which is why other countries taking non US money to buy/sell oil is such a huge deal for Americans. Interest rates and the ridiculous printing of money has a lot to do with things but it’s not why countries trade in the US dollar.
31 trillion and people think fed can raise rates past inflation 🤣. Rumors has it bank of America got hired to take jpm place to short gold silver market for federal reserve. Also 129% of gdp. Japan lost decade we will have lost century
I cant wait til this bear is done. It feels like it will be years.
You use your hands when talking a little too much. Kinda of distracting. Same movements. lol good info though.
End the Fed and make money worth something again< Devilzadvocate. " It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning" < Henry Ford
VOYAGER IS THE DEVIL BOBBY
The "penny plan" is sounding pretty good right about now. That's reducing all gov't expenditures across the board by 1% a year until we work ourselves out of this financial mess. After all, most of us have been making do with less every year since the 2008 financial crisis that was largely the product of bad policy (like the current situation).
Great content…thanks man.
Still taking FTX money if they go under and keep the costumers money I'm going to unsubscribe n find better channel
Thanks!
Another great video Graham!!! 🥰🥰🥰❤️