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  • Global governments have a long and ignoble history of not paying back the money that they borrow

  • And yet the market for lending to them has never been bigger

  • Here to explain why is the FT's economics writer and the author of a book on the politics of debt, Martin Sandbu

  • Martin, thank you very much for joining us

  • So the first chart that we've got shows just how much governments have borrowed

  • and it shows how steadily the amounts have increased over time

  • Why are they borrowing so much?

  • It is enormous, isn't it?

  • This is getting up to probably the size of the whole global economy

  • how much a global economy produces in a year

  • Governments borrow for good reasons and bad reasons

  • A good reason could be borrow to invest

  • governments can usually borrow at low rates, and they can invest in public goods and infrastructure that benefits the economy

  • could be bad reasons, like wanting to spend a lot without taxing, the population that's electorally beneficial sometimes

  • but I think a very important thing, and you can see that here, has to do with crisis stabilization

  • So you see that this accelerates around the Global Financial Crisis in 2008 and 2009

  • And the reason is that when the private sector suddenly stops spending, the economy can collapse

  • if you're to arrest that collapse, the government has to do deficit spending

  • so they start borrowing basically in order to stabilize the economy, and that's what happened there

  • So that explains why governments want to borrow so much

  • but given the increases happened at around a time of crisis, why would anybody be lending to them?

  • Well, that depends a bit on the country

  • There are a bunch of different measures that investors might look at

  • One is simply to look at how much debt the country already has to service

  • and we can see just how much that varies if you look at the different countries here

  • from Japan, infamously huge debt to GDP. Greece, of course, has been in crisis for years and years

  • and then down to some of the newcomers to debt markets

  • Saudi Arabia and Argentina both entered markets in 2016 after being out for a while for very different reasons

  • Saudi because it didn't need the money, Argentina because they were in court for non-payment

  • But the point is that they had very little debt outstanding, so once, and you know, legal issues are sorted out

  • these would seem like good credits

  • So credit worthiness isn't just about the amount of money that a country has already borrowed

  • It's not just about that. That factor’s in if somebody doesn't owe anything, why wouldn't you lend to them

  • but another thing people look at is does the central bank, does the government issue debt in its own currency?

  • Does its central bank print the money that eventually it uses to pay it back

  • So Japan seems like a safe place because it borrows in yen largely

  • So I think we have a third chart that shows the source of returns that investors can get if they are lending money to Japan, and they are extremely small

  • so I wonder how long you think that this credit boom can continue?

  • They are in fact negative, yeah we see here the green line has gone below zero, which is how much the Japanese government has to pay to borrow for 10 years

  • actually it's getting paid to take money for 10 years

  • That's extreme, but you see the same in Germany. You see the same pattern, the downwards slope in borrowing cost for pretty much every government in the world

  • got U.S. and U.K in red and blue here

  • The reason is because central banks are being really active trying to pump money into the economy to get growth going

  • That drives interest rates down and that makes it easier for governments to borrow

  • So it's the central banks that are fueling this credit boom in government debt, in part?

  • It's in part the central banks, it's also that the private sector isn't that keen on spending, wants to save

  • and so there's a lot of saving that has to go somewhere

  • Governments still seem to be the safest, most credit-worthy borrowers out there on the whole

  • So, you know, with this wall of money coming both from central banks and from private savers

  • governments are there and can pick up cheap borrowing

  • So the boom will continue for the foreseeable future

  • Martin, thank you very much

Global governments have a long and ignoble history of not paying back the money that they borrow

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世界の政府債務が活況を呈している理由|FTマーケッツ (Why global government debt is booming | FT Markets)

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    Kristi Yang に公開 2021 年 01 月 14 日
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