Good morning Hanky's Friday! You know who is in my Hug Bucket? Greece. Every time I see Greece, I just want to give them a big O hug. But I don't, however, want to give them a one hundred and fifty billion euro and therein lies a problem.
Ok, so Hank, I want to talk about sovereign debt today. But just to establish the outset that this is not a particularly political problem. Here is a chart of the gross federal debt by president as a percentage of GDP. As you will notice the fluctuations have nothing to do with whether the president is blue or red. The same is true in other developed countries as well.
Okay, so I... To begin, let me tell you one of the great rules of economics: If you are rich, you have to be an idiot not to stay rich, and if you are poor, you have to be really smart to get rich. This is true for individuals, but it's also true for countries. Fancypants countries with fancypants currencies have all kinds of advantages over developing countries including that we are able to borrow money cheaply. In fact, because fancypants countries can borrow money so cheaply, it actually often makes sense to run a deficit. And the reason for this is that in the long term, our economy can grow faster than the cheap, cheap debt we're acquiring to pay for our economy to grow.
So that is not inherently bad for nations. The famous example for this is that in 1945 the United States had a debt that was more than one hundred percent of its GDP, and our deficit was more than twenty percent of our GDP, and that level of debt immediately preceded the largest expansion of our economy in history, also the largest expansion of our waistlines in history. Yes, that's funny, we did get fat.
So debt is not bad! But debt that you can't repay is very bad. The trick of fancypants countries being able to borrow money cheaply has always been that the market assumes that fancypants countries are basically guaranteed to pay you back. And when I said the market assumes, I mean the market assumed until two months ago when they realized that Greece, a fancypants country with a fancypants currency, maybe can't pay back its debts.
What's interesting is that Greece is probably technically in a better economic position than America was back in 1945. But for a variety of reasons, some of the very legitimate, the markets has cited that Greece won't be able to pay back its debt, which in turn has led to new debt being much more expensive, which has in turn made it completely impossible for Greece to ever pay its debt. You see! Hank, there's a circle, and it's vicious. That's where they got the term.
This raises the possibilities that fancypants countries with fancypants currencies might not pay back the money we loan them, which will probably raise interest rates for a lot of fancypants countries, which could lead via the vicious circle to more default, higher interest rates, more defaults, higher interest rates, I could go on like this forever, which would be very bad, like we would yearn for the days of ten percent unemployment.
All of which is complicated by the fact that we're coming out of a worldwide recession, and the total economic output of the world is smaller. So there is less money coming in taxes, but governments still need to spend approximately the same amount of money. And for everybody who says that the problem is wasteful government spending, we aren't even close to a balanced budget. I mean, the United States would have to eliminate both of its two biggest expenses, social security and defense, in order to even come close to balancing the budget. The only other way to shrink the deficit would to be to raise taxes, which is not generally seen as a good idea during a recession.
So the problem of sovereign debt may be not being as cheap as it once was. It isn't the fault of any one political ideology, it's kind of everybody's fault.
So basically Hank, I don't want to alarm you, but I do think we should all buy unicorn pinatas and hide our valuables in them. Actually Hank, the unicorn strategy won't work, because we have to keep loaning each other money, and we have to figure out a way to loan confidently, like we did back in 1945. That's why the EU and the IMF are working so hard to try to nail down a bailout plan for Greece. And if fancypants countries can't continue to convince us that our money is as safe with them as it is inside of a unicorn pinata, they will lose the cheap money privilege they have enjoyed for centuries. And history tells us that once a stupid rich man gets poor, he doesn't usually get rich again unless he is Donald Trump.
因此，基本上Hank，我不希望警告你們，但我是認為我們都應該購買Unicorn pinatas(註四)並把貴重物品藏在裡面。事實上，Hank，Unicorn策略是無效的，因為我們要持續互相借貸，我們必須找出一種方式去有信心的借貸，就像我們從前在1945年做的一樣。這就是為何歐盟和IMF非常努力嘗試為希臘制定一個救助計劃。而如果華麗外表國家不能繼續說服我們，我們的錢在他們那邊像是在Unicorn Pinatas裡面一樣是安全的，他們將失去他們享受了幾世紀的廉價資金特權。而且歷史告訴我們，一旦一個愚蠢的富人變窮，他通常不會再致富，除非他是Donald Trump(知名企業家川普)。
Hank, I'll see you on Monday.
Hank, I told you I'll see you on Monday. That's your signal to stop watching, but nerdfighters, there's still time to participate in our secret project. Click here for more info! Here, I've made it a heart for you. Click!
註一：Hug Bucket: 原本應該是Hank借用Bucket List的意思所衍生出來的自創新字。意思是要擁抱的名單。
註三：yearn for the days of 10% unemployment: yearn可以當作思念、懷念或是憐憫、同情。照影片的原意應該是說時機很壞，讓人們想念那些10%失業率的日子。
註四：unicorn piñatas: 一隻獨角獸的名字，美國人常常把生日禮物或是萬聖節禮物藏在身體裡面。這邊是暗指大家可以把錢藏在裡面。