的军事学,怎样与人

本身和本身身边的同伴都曾有过这么的阅历:在国外跨进一家银行,也许要与人谈论金融大概金钱的时候往往感到有点词穷。借使你也有过这么的两难经历,能够驾驭以下的词汇来个咸鱼翻身。假如你依然认为那些词太不难不够用,那能够学学有个别习语来涨一涨自个儿的比格~

1
00:00:00,000 –> 00:00:00,110

The other day a friend of mine approached me excitedly, saying, “I found
the house of my dreams. It’s in foreclosure and the bank will sell it to
me for a great price.”

成长丹麦语英美外籍教授在线1对1:

2
00:00:00,110 –> 00:00:03,158
How the economic machine works, in 30 minutes.

“How good is the price?” I asked.

http://www.hiknow.com/sessionhall.html?uid=sophie (免费试听)

3
00:00:03,158 –> 00:00:06,679
The economy works like a simple machine.

“Just before the real estate market crashed, the seller was asking
$780,000 for the property. Today, I can buy it from the bank for
$215,000. What do you think?” she asked.

成长学罗马尼亚语,来乐知葡萄牙语,10年专注在线意大利共和国语培养和磨炼。

4
00:00:06,679 –> 00:00:09,390
But many people don’t understand it

“How would I know?” I replied. “All you’ve given me is the price.”

行务(BANKING)

5
00:00:09,390 –> 00:00:11,490
— or they don’t agree on how it works

“Yes!” she squealed. “Now my husband and I can afford it.”

银行对账单(bank statement)

6
00:00:11,490 –> 00:00:15,150
— and this has led to a lot of needless economic suffering.

“Only cheap people buy on price,” I replied. “Just because something is
cheap doesn’t mean it’s worth the cost.”

当今有过多少人都在线浏览银行对账单。

7
00:00:15,150 –> 00:00:18,249
I feel a deep sense of responsibility

I then explained to her one of my most basic money principles: I buy
value. I will pay more for value. If I don’t like the price, I simply
pass. If the seller wants to sell, he will come back with a better
price. I let him tell me what he will accept. I know some people love to
haggle; personally, I don’t. If a person wants to sell, they will sell.
If I feel what I am buying is of value, I’ll pay the price. Value rather
than price has made me rich.

Most people view bank statements online these days.

8
00:00:18,248 –> 00:00:22,048
to share my simple but practical economic template.

Against my advice, my friend sought financing for her “dream” home.

破产(bankrupt)

9
00:00:23,048 –> 00:00:25,320
Though it’s unconventional,

Fortunately, the bank turned her down. The house was on a busy street in
a deteriorating neighborhood. The high school four blocks away was one
of the most dangerous schools in the city. Her son and daughter would
either have to go to private school or take karate lessons. She is now
looking for a cheaper house to buy and has asked her father, who is
retired, for help with the down payment. If her past is a crystal ball
to her future, she will likely always be cheap and poor, even though she
is a good, kind, educated, hard-working person.

很黯然的是,三年前那项工作一度退步了。

10
00:00:25,320 –> 00:00:30,149
it has helped me to anticipate and sidestep the global financial crisis,

My Point of View

Unfortunately the business went bankrupt three years ago.

11
00:00:30,149 –> 00:00:32,460
and has worked well for me for over 30 years.

What follows are some thoughts on why my friend will probably never get
ahead financially — especially in this market.

出纳员(cashier)

12
00:00:32,460 –> 00:00:34,259
Let’s begin.

She and her husband have college degrees but zero financial education.
Even worse, neither plans to attend any investment classes. Choosing to
remain financially uneducated has caused them to miss out on the
greatest bull and bear markets in history. As my rich dad often said,
“What you don’t know keeps you poor.”

出纳员能够帮您把款项计入现金进出记录机。

13
00:00:34,259 –> 00:00:39,519
Though the economy might seem complex, it works in a simple, mechanical
way.

She is too emotional. In the world of money and investing, you must
learn to control your emotions. When you think about it, three of our
biggest financial decisions in life are made at times of peak emotional
excitement: deciding to get married, buying a home, and having kids.

The cashier can ring this up for you.

14
00:00:39,520 –> 00:00:43,930
It’s made up of a few simple parts and a lot of simple transactions

My dad often said, “High emotions, low intelligence.” To be rich, you
need to see the good and the bad, the short- and long-term consequences
of your decisions. Obviously, this is easier said than done, but it’s
key to building wealth.

信用卡(credit card)

15
00:00:43,929 –> 00:00:47,259
that are repeated over and over again a zillion times.

She doesn’t know the difference between advice from rich people and
advice from sales people. Most people get their financial advice from
the latter — people who profit even if you lose. One reason why
financial education is so important is because it helps you know the
difference between good and bad advice.

自个儿想把那笔款计入信用卡,7个月后还清。

16
00:00:47,259 –> 00:00:51,460
These transactions are above all else driven by human nature,

As the current crisis demonstrates, our schools teach very little about
money management. Millions of people are living in fear because they
followed conventional wisdom: Go to school, get a job, work hard, save
money, buy a house, get out of debt, and invest for the long term in a
well-diversified portfolio of mutual funds. Many people who followed
this financial prescription are not sleeping at night. They need a new
plan. Had they sought out a little financial education, they might not
be entangled in this mess.

I’d like to put this on my credit card and pay it off over three months.

17
00:00:51,460 –> 00:00:54,799
and they create 3 main forces that drive the economy.

A Thank You to Jon Stewart

货币(currency)

18
00:00:55,799 –> 00:00:58,119
Number 1: Productivity growth

Speaking of finance experts, I personally want to thank Jon Stewart of
‘The Daily Show’ for taking on Jim Cramer and CNBC. Jon Stewart did an
incredible job of representing the millions of people all over the world
who have lost their savings in the market. He was right in saying he
thought it “disingenuous” to advise people to invest for the long term
through their retirement plans while knowing full well that traders
could steal Americans’ retirement money by trading in and out of the
market. Most traders like Cramer realize that investing in mutual funds
for the long term is financial suicide. Cramer should have spoken up,
but we all know why CNBC won’t let him tell the truth. If he did, the
station’s advertisers would leave.

从前澳大圣Pedro苏拉(Australia)有很各样差别的钱币时,作者很喜爱住在那。

19
00:00:58,119 –> 00:01:01,649
Number 2: The Short term debt cycle

While I applaud Cramer for going on ‘The Daily Show’ and facing the
music, I’m afraid he was marginalized by Stewart — certainly outgunned
— and he has lost his credibility. He may pay an even bigger price if
the SEC decides to dig deeper.

I enjoyed living in Europe when there were many different colorful
currencies.

20
00:01:01,649 –> 00:01:04,400
and Number 3: The Long term debt cycle

Jim Cramer is a very smart man. I watch his show. I just do not follow
his advice.

汇率(exchange rate)

21
00:01:04,400 –> 00:01:07,770
We’ll look at these three forces and how laying them on top of each
other

In closing, I will say what I have said for years: We need financial
education in our schools. Without it, we cannot tell the good advice
from the bad.

今天的汇率格外好。

22
00:01:07,769 –> 00:01:11,530
creates a good template for tracking economic movements

The exchange rate is very favorable today.

23
00:01:11,530 –> 00:01:13,590
and figuring out what’s happening now.

利息率(interest rate)

24
00:01:13,590 –> 00:01:16,829
Let’s start with the simplest part of the economy:

你的那笔贷款利息相当低。

25
00:01:16,829 –> 00:01:18,859
Transactions.

You can get a very low interest rate on this loan.

26
00:01:19,340 –> 00:01:23,840
An economy is simply the sum of the transactions that make it up

抵押(mortgage)

27
00:01:23,840 –> 00:01:26,570
and a transaction is a very simple thing.

大多数人只能办理抵押来买房。

28
00:01:26,569 –> 00:01:28,359
You make transactions all the time.

Most people have to take out a mortgage to buy a house.

29
00:01:28,359 –> 00:01:31,760
Every time you buy something you create a transaction.

欠钱(owe)

30
00:01:31,760 –> 00:01:35,240
Each transaction consists of a buyer

自家还欠银行三千法郎。

31
00:01:35,239 –> 00:01:37,149
exchanging money or credit

I still owe $3,000 to the bank.

32
00:01:37,150 –> 00:01:42,550
with a seller for goods, services or financial assets.

存款(savings)

33
00:01:42,549 –> 00:01:45,149
Credit spends just like money,

自作者把自家的储蓄和贷款存在多少个利息高的银行里。

34
00:01:45,150 –> 00:01:49,280
so adding together the money spent and the amount of credit spent,

I keep my savings in a different bank with higher interest.

35
00:01:49,280 –> 00:01:52,159
you can know the total spending.

取款(withdraw)

36
00:01:52,159 –> 00:01:55,560
The total amount of spending drives the economy.

自个儿想从自己的账户里取出500欧元。

37
00:01:55,560 –> 00:01:57,590
If you divide the amount spent

I’d like to withdraw $500 from my account.

38
00:01:57,590 –> 00:01:59,990
by the quantity sold,

购买(BUYING)

39
00:01:59,989 –> 00:02:01,289
you get the price.

谈判(bargain)

40
00:02:01,290 –> 00:02:04,380
And that’s it. That’s a transaction.

自作者用很合算的价钱买到一辆新车。

41
00:02:04,480 –> 00:02:07,109
It is the building block of the economic machine.

I got a great bargain on a new car.

42
00:02:07,109 –> 00:02:12,019
All cycles and all forces in an economy are driven by transactions.

分期付款(installments)

43
00:02:12,019 –> 00:02:14,468
So, if we can understand transactions,

你能够分十期付款,每期99新币。

44
00:02:14,468 –> 00:02:16,568
we can understand the whole economy.

You can pay in ten easy installments of $99.

45
00:02:16,568 –> 00:02:19,509
A market consists of all the buyers

收据(receipt)

46
00:02:19,509 –> 00:02:20,509
and all the sellers

当购买电子产品的时候一定要留好收据。

47
00:02:20,509 –> 00:02:22,909
making transactions for the same thing.

Always keep receipts when purchasing electronics.

48
00:02:23,110 –> 00:02:25,540
For example, there is a wheat market,

减价(reduction)

49
00:02:25,539 –> 00:02:26,840
a car market,

我们今天有特价。

50
00:02:26,840 –> 00:02:27,640
a stock market

We’re offering a special price reduction today.

51
00:02:27,639 –> 00:02:29,549
and markets for millions of things.

退货(refund)

52
00:02:31,050 –> 00:02:33,469
An economy consists of all of the transactions

自家闺女不喜欢那条裤子,能退货吗?

53
00:02:33,469 –> 00:02:34,669
in all of its markets.

My daughter didn’t like these pants. Can I get a refund?

54
00:02:34,669 –> 00:02:37,549
If you add up the total spending

收入(EARNING)

55
00:02:37,550 –> 00:02:39,450
and the total quantity sold

奖金(bonus)

56
00:02:39,449 –> 00:02:40,429
in all of the markets,

一部分经理会在年关的时候给奖金。

57
00:02:40,430 –> 00:02:42,030
you have everything you need to know

Some bosses give a bonus at the end of the year.

58
00:02:42,030 –> 00:02:43,629
to understand the economy.

income(收入)

59
00:02:44,530 –> 00:02:45,960
It’s just that simple.

您曾举报过任何投资收入呢?

60
00:02:46,560 –> 00:02:49,430
People, businesses, banks and governments

Did you have any investment income to declare?

61
00:02:49,430 –> 00:02:53,730
all engage in transactions the way I just described:

总收入(gross income)

62
00:02:53,729 –> 00:02:58,530
exchanging money and credit for goods, services and financial assets.

咱俩二零一九年的总收入升高了12%。

63
00:02:59,030 –> 00:03:01,500
The biggest buyer and seller is the government,

Our gross income rose 12% this year.

64
00:03:02,599 –> 00:03:04,039
which consists of two important parts:

净收入(net income)

65
00:03:04,039 –> 00:03:07,689
a Central Government that collects taxes and spends money…

笔者们付出较大,所以净收入下落了。

66
00:03:07,689 –> 00:03:09,669
…and a Central Bank,

We had a lot of costs, so our net income fell.

67
00:03:09,669 –> 00:03:12,269
which is different from other buyers and sellers because it

加薪(raise)

68
00:03:12,269 –> 00:03:15,989
controls the amount of money and credit in the economy.

他的业主给他加薪是因为他是12分好的职工。

69
00:03:16,688 –> 00:03:19,650
It does this by influencing interest rates

Her boss gave her a raise because she’s such a great employee.

70
00:03:19,650 –> 00:03:21,020
and printing new money.

捐赠(GIVING)

71
00:03:21,020 –> 00:03:23,620
For these reasons, as we’ll see,

募捐(collection)

72
00:03:24,020 –> 00:03:27,200
the Central Bank is an important player in the flow

教堂以募捐来救助贫困的家园。

73
00:03:27,699 –> 00:03:28,699
of Credit.

The church took a collection to help the poor family.

74
00:03:29,400 –> 00:03:31,629
I want you to pay attention to credit.

捐赠(donate)

75
00:03:31,628 –> 00:03:34,658
Credit is the most important part of the economy,

今后用捐赠来做爱心很关键。

76
00:03:34,658 –> 00:03:36,538
and probably the least understood.

It’s important to donate to charity these days.

77
00:03:37,038 –> 00:03:40,318
It is the most important part because it is the biggest

补助金(grant)

78
00:03:40,318 –> 00:03:42,099
and most volatile part.

高校收取了政坛的协理费来做研究。

79
00:03:42,599 –> 00:03:45,099
Just like buyers and sellers go to the market to make transactions,

The school received a governmental grant to do the research.

80
00:03:47,099 –> 00:03:49,968
so do lenders and borrowers.

低收入所得税(income tax)

81
00:03:49,968 –> 00:03:53,568
Lenders usually want to make their money into more money

多数都会都有收入所得税,但有一些都市没有。

82
00:03:53,568 –> 00:03:57,259
and borrowers usually want to buy something they can’t afford,

Most countries have an income tax, but a few lucky ones don’t.

83
00:03:57,259 –> 00:03:59,058
like a house or car

遗产(inheritance)

84
00:03:59,058 –> 00:04:02,318
or they want to invest in something like starting a business.

他二零一八年获得了一大笔遗产,所以他不要再工作了。

85
00:04:03,019 –> 00:04:04,599
Credit can help both lenders

She came into a large inheritance last year, so she doesn’t need to
work.

86
00:04:04,598 –> 00:04:07,798
and borrowers get what they want.

退休金(pension)

87
00:04:08,098 –> 00:04:11,560
Borrowers promise to repay the amount they borrow,

有的是父老靠很少的退休金生活。

88
00:04:11,560 –> 00:04:12,718
called the principal,

Many elderly live on a small pension.

89
00:04:12,718 –> 00:04:15,418
plus an additional amount, called interest.

零用钱(pocket money)

90
00:04:15,419 –> 00:04:17,560
When interest rates are high,

给孩子零用钱很关键。

91
00:04:17,560 –> 00:04:20,560
there is less borrowing because it’s expensive.

It’s important to give your children pocket money.

92
00:04:20,560 –> 00:04:22,540
When interest rates are low,

小费(tip)

93
00:04:22,540 –> 00:04:25,040
borrowing increases because it’s cheaper.

本人三番五次会给小费,除了服务太糟。

94
00:04:25,040 –> 00:04:27,930
When borrowers promise to repay

I always leave a tip unless the service is very bad.

95
00:04:28,329 –> 00:04:29,959
and lenders believe them,

动词类(VERBS)

96
00:04:29,959 –> 00:04:31,059
credit is created.

合计(add up)

97
00:04:31,658 –> 00:04:35,170
Any two people can agree to create credit out of thin air!

账上说道得语无伦次,大家再度算一下。

98
00:04:35,769 –> 00:04:39,209
That seems simple enough but credit is tricky

The bookkeeping doesn’t add up correctly. Let’s recalculate.

99
00:04:39,209 –> 00:04:40,498
because it has different names.

增长/降低(go up / down)

100
00:04:40,499 –> 00:04:43,599
As soon as credit is created,

存货的标价进步了14%。

101
00:04:43,598 –> 00:04:45,028
it immediately turns into debt.

The price of the stock went up 14%.

102
00:04:46,228 –> 00:04:48,669
Debt is both an asset to the lender,

收入和支出相抵(make ends meet)

103
00:04:48,670 –> 00:04:50,770
and a liability to the borrower.

以往更多的人发现收入和支出相抵很难。

104
00:04:51,370 –> 00:04:52,540
In the future,

More and more people are finding it difficult to make ends meet these
days.

105
00:04:52,540 –> 00:04:56,240
when the borrower repays the loan, plus interest,

偿还(pay back)

106
00:04:56,240 –> 00:04:58,549
the asset and liability disappear

Tom在三年内归还了借款。

107
00:04:58,548 –> 00:05:00,948
and the transaction is settled.

Tom paid back the loan in three years.

108
00:05:01,749 –> 00:05:04,629
So, why is credit so important?

存入(pay into)

109
00:05:05,228 –> 00:05:07,618
Because when a borrower receives credit,

自小编各样月都存一小笔钱入退休金账户。

110
00:05:07,619 –> 00:05:09,719
he is able to increase his spending.

I pay a small amount into a retirement account every month.

111
00:05:09,718 –> 00:05:13,348
And remember, spending drives the economy.

耗尽(run out)

112
00:05:13,348 –> 00:05:15,699
This is because one person’s spending

您是或不是在月尾前就把钱花光了?

113
00:05:15,699 –> 00:05:17,098
is another person’s income.

Have you ever run out of money before the end of the month?

114
00:05:17,499 –> 00:05:22,189
Think about it, every dollar you spend, someone else earns.

节省(save up)

115
00:05:22,189 –> 00:05:25,278
and every dollar you earn, someone else has spent.

自己节约了20000新币来买一辆新车。

116
00:05:25,278 –> 00:05:29,149
So when you spend more, someone else earns more.

I’ve saved up over $10,000 to buy a new car.

117
00:05:29,149 –> 00:05:32,649
When someone’s income rises

别的连锁的词汇

118
00:05:32,649 –> 00:05:34,649
it makes lenders more willing to lend him money

利润(profit)

119
00:05:34,649 –> 00:05:37,629
because now he’s more worthy of credit.

这一单大家获得了十分大的赢利。

120
00:05:37,629 –> 00:05:40,929
A creditworthy borrower has two things:

We made a great profit on the deal.

121
00:05:40,928 –> 00:05:43,518
the ability to repay and collateral.

浪费钱(waste of money)

122
00:05:44,319 –> 00:05:48,319
Having a lot of income in relation to his debt gives him the ability to
repay.

抽烟对符合规律损害,还浪费钱。

123
00:05:49,079 –> 00:05:55,749
In the event that he can’t repay, he has valuable assets to use as
collateral that can be sold.

Smoking cigarettes is bad for your health and a waste of money.

124
00:05:55,749 –> 00:06:00,340
This makes lenders feel comfortable lending him money.

不值钱(worthless)

125
00:06:00,439 –> 00:06:03,959
So increased income allows increased borrowing

很不佳的是,那幅画不值钱。

126
00:06:03,959 –> 00:06:05,680
which allows increased spending.

Unfortunately, that painting is worthless.

127
00:06:05,680 –> 00:06:09,920
And since one person’s spending is another person’s income,

形容词(DESCRIPTIVE ADJECTIVES)

128
00:06:09,920 –> 00:06:13,360
this leads to more increased borrowing and so on.

富裕的(affluent)

129
00:06:13,360 –> 00:06:17,350
This self-reinforcing pattern leads to economic growth

富国的芸芸众生并不知道他们有多幸运。

130
00:06:17,350 –> 00:06:21,640
and is why we have Cycles.

Affluent people don’t always know how lucky they are.

131
00:06:21,639 –> 00:06:25,620
In a transaction, you have to give something in order to get something

慷慨大方的(generous)

132
00:06:25,620 –> 00:06:28,829
and how much you get depends on how much you produce

大方地赠送了伍仟英镑。

133
00:06:29,329 –> 00:06:31,430
over time we learned

The generous donor gave over $5,000.

134
00:06:31,430 –> 00:06:34,680
and that accumulated knowledge raises are living standards

缺钱(hard-up)

135
00:06:34,680 –> 00:06:36,930
we call this productivity growth

小编想Peter要缺钱了,他找不到办事。

136
00:06:37,430 –> 00:06:40,430
those who were invented and hard-working raise

I’m afraid Peter is hard-up. He hasn’t been able to find a job.

137
00:06:40,430 –> 00:06:43,540
their productivity and their living standards faster

吝啬的(mean)

138
00:06:43,540 –> 00:06:46,950
than those who are complacent and lazy,

他很抠门,都不给婴儿买礼品。

139
00:06:48,850 –> 00:06:49,710
but that isn’t necessarily true over the short run.

She’s very mean. She wouldn’t even buy a baby a present.

140
00:06:49,709 –> 00:06:54,339
Productivity matters most in the long run, but credit matters most in
the short run.

成功的(prosperous)

141
00:06:54,339 –> 00:06:58,369
This is because productivity growth doesn’t fluctuate much,

那位成功人员越来越胖,越来越懒。

142
00:06:58,370 –> 00:07:01,480
so it’s not a big driver of economic swings.

The prosperous man grew fat and lazy.

143
00:07:01,480 –> 00:07:06,750
Debt is — because it allows us to consume more than we produce when we
acquire it

吝啬的(stingy)

144
00:07:06,750 –> 00:07:11,050
and it forces us to consume less than we produce when we pay it back.

无须对你的孩子们太小气。

145
00:07:11,050 –> 00:07:14,770
Debt swings occur in two big cycles.

Don’t be so stingy with your children.

146
00:07:14,769 –> 00:07:20,829
One takes about 5 to 8 years and the other takes about 75 to 100 years.

富裕的(well off)

147
00:07:20,829 –> 00:07:25,159
While most people feel the swings, they typically don’t see them as
cycles

Jennifer很有钱,不要做事来养活本身了。

148
00:07:25,160 –> 00:07:29,490
because they see them too up close — day by day, week by week.

Jennifer is very well off and doesn’t have to work for a living.

149
00:07:29,490 –> 00:07:32,949
In this chapter we are going to step back and look at these three big
forces

1���|�ﲖ�

150
00:07:32,949 –> 00:07:37,000
and how they interact to make up our experiences.

151
00:07:37,399 –> 00:07:42,339
As mentioned, swings around the line are not due to how much innovation
or hard work there is,

152
00:07:42,339 –> 00:07:46,239
they’re primarily due to how much credit there is.

153
00:07:46,240 –> 00:07:50,069
Let’s for a second imagine an economy without credit.

154
00:07:50,069 –> 00:07:53,810
In this economy, the only way I can increase my spending

155
00:07:53,810 –> 00:07:55,480
is to increase my income,

156
00:07:55,480 –> 00:07:59,080
which requires me to be more productive and do more work.

157
00:07:59,079 –> 00:08:03,019
Increased productivity is the only way for growth.

158
00:08:03,019 –> 00:08:05,250
Since my spending is another person’s income,

159
00:08:05,250 –> 00:08:10,430
the economy grows every time I or anyone else is more productive.

160
00:08:10,430 –> 00:08:13,530
If we follow the transactions and play this out,

161
00:08:13,529 –> 00:08:16,909
we see a progression like the productivity growth line.

162
00:08:16,910 –> 00:08:20,780
But because we borrow, we have cycles.

163
00:08:20,779 –> 00:08:23,899
This isn’t due to any laws or regulation,

164
00:08:23,899 –> 00:08:27,659
it’s due to human nature and the way that credit works.

165
00:08:27,660 –> 00:08:32,269
Think of borrowing as simply a way of pulling spending forward.

166
00:08:32,269 –> 00:08:37,478
In order to buy something you can’t afford, you need to spend more than
you make.

167
00:08:37,479 –> 00:08:41,460
To do this, you essentially need to borrow from your future self.

168
00:08:41,460 –> 00:08:44,610
In doing so you create a time in the future

169
00:08:44,610 –> 00:08:48,690
that you need to spend less than you make in order to pay it back.

170
00:08:48,690 –> 00:08:51,950
It very quickly resembles a cycle.

171
00:08:51,950 –> 00:08:55,400
Basically, anytime you borrow you create a cycle.?

172
00:08:55,399 –> 00:08:59,949
This is as true for an individual as it is for the economy.

173
00:08:59,950 –> 00:09:01,850
This is why understanding credit is so important

174
00:09:01,850 –> 00:09:04,590
because it sets into motion

175
00:09:04,590 –> 00:09:08,790
a mechanical, predictable series of events that will happen in the
future.

176
00:09:08,789 –> 00:09:11,569
This makes credit different from money.

177
00:09:13,470 –> 00:09:14,580
Money is what you settle transactions with.

178
00:09:14,580 –> 00:09:18,120
When you buy a beer from a bartender with cash,

179
00:09:18,120 –> 00:09:20,799
the transaction is settled immediately.

180
00:09:20,799 –> 00:09:22,629
But when you buy a beer with credit,

181
00:09:22,629 –> 00:09:24,730
it’s like starting a bar tab.

182
00:09:24,730 –> 00:09:27,529
You’re saying you promise to pay in the future.

183
00:09:27,529 –> 00:09:32,069
Together you and the bartender create an asset and a liability.

184
00:09:32,070 –> 00:09:35,250
You just created credit. Out of thin air.

185
00:09:35,250 –> 00:09:38,899
It’s not until you pay the bar tab later

186
00:09:38,899 –> 00:09:41,250
that the asset and liability disappear,

187
00:09:41,250 –> 00:09:42,549
the debt goes away

188
00:09:42,649 –> 00:09:44,090
and the transaction is settled.

189
00:09:45,090 –> 00:09:50,250
The reality is that most of what people call money is actually credit.

190
00:09:50,250 –> 00:09:55,509
The total amount of credit in the United States is about $50 trillion

191
00:09:55,509 –> 00:09:59,679
and the total amount of money is only about $3 trillion.

192
00:09:59,679 –> 00:10:02,039
Remember, in an economy without credit:

193
00:10:02,039 –> 00:10:05,199
the only way to increase your spending is to produce more.

194
00:10:05,399 –> 00:10:07,279
But in an economy with credit,

195
00:10:07,279 –> 00:10:10,779
you can also increase your spending by borrowing.

196
00:10:10,779 –> 00:10:14,120
As a result, an economy with credit has more spending

197
00:10:14,120 –> 00:10:18,090
and allows incomes to rise faster than productivity over the short run,

198
00:10:18,090 –> 00:10:19,889
but not over the long run.

199
00:10:20,090 –> 00:10:21,360
Now, don’t get me wrong,

200
00:10:21,559 –> 00:10:25,659
credit isn’t necessarily something bad that just causes cycles.

201
00:10:25,659 –> 00:10:30,899
It’s bad when it finances over-consumption that can’t be paid back.

202
00:10:30,899 –> 00:10:34,490
However, it’s good when it efficiently allocates resources

203
00:10:34,490 –> 00:10:37,690
and produces income so you can pay back the debt.

204
00:10:37,690 –> 00:10:40,980
For example, if you borrow money to buy a big TV,

205
00:10:40,980 –> 00:10:43,879
it doesn’t generate income for you to pay back the debt.

206
00:10:44,078 –> 00:10:47,879
But, if you borrow money to buy a tractor —

207
00:10:48,379 –> 00:10:51,559
and that tractor let’s you harvest more crops and earn more money

208
00:10:51,559 –> 00:10:53,089
— then, you can pay back your debt

209
00:10:53,090 –> 00:10:56,490
and improve your living standards.

210
00:10:56,490 –> 00:10:57,600
In an economy with credit,

211
00:10:57,600 –> 00:10:59,600
we can follow the transactions

212
00:10:59,600 –> 00:11:01,300
and see how credit creates growth.

213
00:11:01,399 –> 00:11:03,679
Let me give you an example:

214
00:11:04,080 –> 00:11:08,190
Suppose you earn $100,000 a year and have no debt.

215
00:11:08,389 –> 00:11:11,539
You are creditworthy enough to borrow $10,000 dollars

216
00:11:11,539 –> 00:11:13,039

  • say on a credit card

217
00:11:13,039 –> 00:11:15,250

  • so you can spend $110,000 dollars

218
00:11:15,250 –> 00:11:18,250
even though you only earn $100,000 dollars.

219
00:11:18,750 –> 00:11:21,460
Since your spending is another person’s income,

220
00:11:21,460 –> 00:11:24,460
someone is earning $110,000 dollars.

221
00:11:25,059 –> 00:11:27,669
The person earning $110,000 dollars

222
00:11:27,769 –> 00:11:31,428
with no debt can borrow $11,000 dollars,

223
00:11:31,428 –> 00:11:34,069
so he can spend $121,000 dollars

224
00:11:34,070 –> 00:11:38,170
even though he has only earned $110,000 dollars.

225
00:11:38,169 –> 00:11:40,639
His spending is another person’s income

226
00:11:40,639 –> 00:11:43,429
and by following the transactions

227
00:11:43,429 –> 00:11:45,429
we can begin to see how this process

228
00:11:45,429 –> 00:11:47,429
works in a self-reinforcing pattern.

229
00:11:47,830 –> 00:11:51,600
But remember, borrowing creates cycles

230
00:11:51,600 –> 00:11:55,808
and if the cycle goes up, it eventually needs to come down.

231
00:11:56,009 –> 00:11:59,710
This leads us into the Short Term Debt Cycle.

232
00:12:00,809 –> 00:12:04,379
As economic activity increases, we see an expansion

233
00:12:04,379 –> 00:12:06,840

  • the first phase of the short term debt cycle.

234
00:12:06,840 –> 00:12:10,720
Spending continues to increase and prices start to rise.

235
00:12:10,720 –> 00:12:15,230
This happens because the increase in spending is fueled by credit

236
00:12:15,230 –> 00:12:17,450

  • which can be created instantly out of thin air.

237
00:12:17,450 –> 00:12:22,680
When the amount of spending and incomes grow faster than the production
of goods:

238
00:12:22,679 –> 00:12:23,879
prices rise.

239
00:12:23,879 –> 00:12:28,000
When prices rise, we call this inflation.

240
00:12:28,000 –> 00:12:32,500
The Central Bank doesn’t want too much inflation

241
00:12:32,500 –> 00:12:35,009
because it causes problems.

242
00:12:35,009 –> 00:12:38,250
Seeing prices rise, it raises interest rates.

243
00:12:38,250 –> 00:12:42,958
With higher interest rates, fewer people can afford to borrow money.

244
00:12:42,958 –> 00:12:45,599
And the cost of existing debts rises.

245
00:12:45,600 –> 00:12:50,100
Think about this as the monthly payments
on your credit card going up.

246
00:12:50,100 –> 00:12:54,459
Because people borrow less and have higher debt repayments,

247
00:12:54,458 –> 00:12:58,719
they have less money leftover to spend, so spending slows

248
00:12:58,720 –> 00:13:02,778
…and since one person’s spending is another person’s income,

249
00:13:02,778 –> 00:13:06,588
incomes drop…and so on and so forth.

250
00:13:06,589 –> 00:13:10,800
When people spend less, prices go down.

251
00:13:10,799 –> 00:13:12,688
We call this deflation.

252
00:13:12,688 –> 00:13:17,459
Economic activity decreases and we have a recession.

253
00:13:17,460 –> 00:13:20,060
If the recession becomes too severe

254
00:13:20,059 –> 00:13:22,439
and inflation is no longer a problem,

255
00:13:22,440 –> 00:13:27,060
the central bank will lower interest rates to cause everything to pick
up again.

256
00:13:27,059 –> 00:13:29,649
With low interest rates,

257
00:13:29,649 –> 00:13:30,649
debt repayments are reduced

258
00:13:30,649 –> 00:13:33,250
and borrowing and spending pick up

259
00:13:33,250 –> 00:13:35,450
and we see another expansion.

260
00:13:35,450 –> 00:13:39,450
As you can see, the economy works like a machine.

261
00:13:40,250 –> 00:13:44,159
In the short term debt cycle,
spending is constrained only by the willingness of

262
00:13:44,159 –> 00:13:47,139
lenders and borrowers to provide and receive credit.

263
00:13:47,139 –> 00:13:52,509
When credit is easily available,
there’s an economic expansion.

264
00:13:52,509 –> 00:13:56,090
When credit isn’t easily available, there’s a recession.

265
00:13:56,090 –> 00:14:00,450
And note that this cycle is controlled primarily by the central bank.

266
00:14:00,450 –> 00:14:05,120
The short term debt cycle typically lasts 5 – 8 years

267
00:14:05,120 –> 00:14:08,409
and happens over and over again for decades.

268
00:14:08,409 –> 00:14:10,409
But notice that the bottom and

269
00:14:10,409 –> 00:14:12,399
top of each cycle finish

270
00:14:12,399 –> 00:14:16,669
with more growth than the previous cycle and with more debt.

271
00:14:16,669 –> 00:14:18,039
Why?

272
00:14:18,039 –> 00:14:20,740
Because people push it

273
00:14:20,740 –> 00:14:25,529
— they have an inclination to borrow
and spend more instead of paying back debt.

274
00:14:25,529 –> 00:14:27,480
It’s human nature.

275
00:14:27,480 –> 00:14:29,379
Because of this,

276
00:14:29,379 –> 00:14:30,679
over long periods of time,

277
00:14:30,679 –> 00:14:33,469
debts rise faster than incomes

278
00:14:33,470 –> 00:14:36,670
creating the Long Term Debt Cycle.

279
00:14:38,070 –> 00:14:39,670
Despite people becoming more indebted,

280
00:14:40,169 –> 00:14:44,029
lenders even more freely extend credit.

281
00:14:44,029 –> 00:14:45,029
Why?

282
00:14:45,029 –> 00:14:48,669
Because everybody thinks things are going great!

283
00:14:48,669 –> 00:14:51,969
People are just focusing on what’s been happening lately.

284
00:14:51,970 –> 00:14:55,649
And what has been happening lately?

285
00:14:55,649 –> 00:14:57,649
Incomes have been rising!

286
00:14:57,649 –> 00:14:59,250
Asset values are going up!

287
00:14:59,250 –> 00:15:01,549
The stock market roars!

288
00:15:01,549 –> 00:15:02,479
It’s a boom!

289
00:15:02,480 –> 00:15:06,690
It pays to buy goods, services, and financial assets

290
00:15:06,690 –> 00:15:08,390
with borrowed money!

291
00:15:08,389 –> 00:15:11,769
When people do a lot of that, we call it a bubble.

292
00:15:11,769 –> 00:15:14,639
So even though debts have been growing,

293
00:15:14,639 –> 00:15:18,110
incomes have been growing nearly as fast to offset them.

294
00:15:18,110 –> 00:15:21,970
Let’s call the ratio of debt-to-income the debt burden.

295
00:15:21,970 –> 00:15:25,210
So long as incomes continue to rise,

296
00:15:25,210 –> 00:15:27,040
the debt burden stays manageable.

297
00:15:27,039 –> 00:15:30,230
At the same time asset values soar.

298
00:15:30,230 –> 00:15:33,230
People borrow huge amounts of money

299
00:15:34,029 –> 00:15:35,059
to buy assets as investments

300
00:15:35,059 –> 00:15:37,659
causing their prices to rise even higher.

301
00:15:37,659 –> 00:15:40,259
People feel wealthy.

302
00:15:40,259 –> 00:15:43,259
So even with the accumulation of lots of debt,

303
00:15:43,259 –> 00:15:49,490
rising incomes and asset values help borrowers remain creditworthy for a
long time.

304
00:15:49,490 –> 00:15:52,529
But this obviously can not continue forever.

305
00:15:52,529 –> 00:15:54,250
And it doesn’t.

306
00:15:54,250 –> 00:16:00,519
Over decades, debt burdens slowly increase creating larger and larger
debt repayments.

307
00:16:00,519 –> 00:16:05,399
At some point, debt repayments start growing faster than incomes

308
00:16:05,399 –> 00:16:08,240
forcing people to cut back on their spending.

309
00:16:08,240 –> 00:16:12,200
And since one person’s spending is another person’s income,

310
00:16:12,200 –> 00:16:14,500
incomes begin to go down…

311
00:16:14,500 –> 00:16:19,019
…which makes people less credit worthy causing borrowing to go down.

312
00:16:19,019 –> 00:16:22,019
Debt repayments continue to rise

313
00:16:22,019 –> 00:16:24,439
which makes spending drop even further…

314
00:16:24,440 –> 00:16:27,140
…and the cycle reverses itself.

315
00:16:27,139 –> 00:16:30,960
This is the long term debt peak.

316
00:16:30,960 –> 00:16:34,150
Debt burdens have simply become too big.

317
00:16:34,149 –> 00:16:38,829
For the United States, Europe and much of the rest of the world this

318
00:16:38,830 –> 00:16:40,759
happened in 2008.

319
00:16:40,759 –> 00:16:45,429
It happened for the same reason it happened in Japan in 1989

320
00:16:45,429 –> 00:16:48,750
and in the United States back in 1929.

321
00:16:48,750 –> 00:16:51,980
Now the economy begins Deleveraging.

322
00:16:51,980 –> 00:16:56,500
In a deleveraging; people cut spending,

323
00:16:56,500 –> 00:16:59,539
incomes fall, credit disappears,

324
00:16:59,539 –> 00:17:02,699
assets prices drop, banks get squeezed,

325
00:17:02,700 –> 00:17:06,340
the stock market crashes, social tensions rise

326
00:17:06,339 –> 00:17:09,708
and the whole thing starts to feed on itself the other way.

327
00:17:09,709 –> 00:17:13,850
As incomes fall and debt repayments rise,

328
00:17:13,849 –> 00:17:17,990
borrowers get squeezed.
No longer creditworthy,

329
00:17:17,990 –> 00:17:22,359
credit dries up and borrowers can no longer borrow
enough money to make their

330
00:17:22,359 –> 00:17:23,599
debt repayments.

331
00:17:23,599 –> 00:17:28,439
Scrambling to fill this hole, borrowers are forced to sell assets.

332
00:17:28,440 –> 00:17:31,549
The rush to sell assets floods the market

333
00:17:31,549 –> 00:17:36,369
This is when the stock market collapses,

334
00:17:36,369 –> 00:17:39,739
the real estate market tanks and banks get into trouble.

335
00:17:39,740 –> 00:17:44,940
As asset prices drop, the value of the collateral borrowers can put up
drops.

336
00:17:44,940 –> 00:17:48,279
This makes borrowers even less creditworthy.

337
00:17:48,279 –> 00:17:50,200
People feel poor.

338
00:17:51,299 –> 00:17:55,009
Credit rapidly disappears.
Less spending ›

339
00:17:55,009 –> 00:17:55,890
less income ›

340
00:17:55,890 –> 00:17:57,890
less wealth ›

341
00:17:57,890 –> 00:17:58,590
less credit ›

342
00:17:58,589 –> 00:18:00,799
less borrowing and so on.

343
00:18:00,799 –> 00:18:03,000
It’s a vicious cycle.

344
00:18:03,000 –> 00:18:06,529
This appears similar to a recession but the difference here

345
00:18:06,529 –> 00:18:10,160
is that interest rates can’t be lowered to save the day.

346
00:18:10,160 –> 00:18:14,590
In a recession, lowering interest rates works to stimulate the
borrowing.

347
00:18:14,589 –> 00:18:18,569
However, in a deleveraging, lowering interest rates doesn’t work because

348
00:18:18,569 –> 00:18:20,529
interest rates are already

349
00:18:20,529 –> 00:18:25,309
low and soon hit 0% – so the stimulation ends.

350
00:18:25,309 –> 00:18:29,210
Interest rates in the United States hit 0% during the deleveraging of

351
00:18:29,210 –> 00:18:30,840
the 1930s

352
00:18:30,839 –> 00:18:33,439
and again in 2008.

353
00:18:33,440 –> 00:18:35,840
The difference between a recession

354
00:18:35,839 –> 00:18:40,269
and a deleveraging is that in a deleveraging borrowers’ debt burdens
have

355
00:18:40,269 –> 00:18:41,930
simply gotten too big

356
00:18:41,930 –> 00:18:45,049
and can’t be relieved by lowering interest rates.

357
00:18:45,049 –> 00:18:50,240
Lenders realize that debts have become too large to ever be fully paid
back.

358
00:18:50,240 –> 00:18:55,309
Borrowers have lost their ability to repay and their collateral has lost
value.

359
00:18:55,309 –> 00:18:59,369
They feel crippled by the debt – they don’t even want more!

360
00:18:59,369 –> 00:19:03,489
Lenders stop lending. Borrowers stop borrowing.

361
00:19:03,490 –> 00:19:07,019
Think of the economy as being not-creditworthy,

362
00:19:07,019 –> 00:19:09,000
just like an individual.

363
00:19:09,000 –> 00:19:12,599
So what do you do about a deleveraging?

364
00:19:12,599 –> 00:19:17,539
The problem is debt burdens are too high and they must come down.

365
00:19:17,539 –> 00:19:20,789
There are four ways this can happen.

366
00:19:20,789 –> 00:19:24,489

  1. people, businesses, and governments cut their spending.

367
00:19:24,489 –> 00:19:28,409

  1. debts are reduced through defaults and restructurings.

368
00:19:28,409 –> 00:19:34,139

  1. wealth is redistributed from the ‘haves’ to the ‘have nots’.

369
00:19:34,138 –> 00:19:37,979
and finally, 4. the central bank prints new money.

370
00:19:37,980 –> 00:19:42,999
These 4 ways have happened in every deleveraging in modern history.

371
00:19:45,699 –> 00:19:47,778
Usually, spending is cut first.

372
00:19:47,878 –> 00:19:52,128
As we just saw, people, businesses, banks and even governments tighten
their belts and

373
00:19:52,128 –> 00:19:54,868
cut their spending so that they can pay down their debt.

374
00:19:54,868 –> 00:19:58,558
This is often referred to as austerity.

375
00:19:58,558 –> 00:20:01,829
When borrowers stop taking on new debts,

376
00:20:01,829 –> 00:20:06,769
and start paying down old debts, you might expect the debt burden to
decrease.

377
00:20:06,769 –> 00:20:10,720
But the opposite happens!
Because spending is cut

378
00:20:10,720 –> 00:20:14,610

  • and one man’s spending is another man’s income – it causes

379
00:20:14,609 –> 00:20:19,028
incomes to fall. They fall faster than debts are repaid

380
00:20:19,028 –> 00:20:23,210
and the debt burden actually gets worse. As we’ve seen,

381
00:20:23,210 –> 00:20:26,329
this cut in spending is deflationary and painful.

382
00:20:26,329 –> 00:20:29,388
Businesses are forced to cut costs…

383
00:20:29,388 –> 00:20:32,778
which means less jobs and higher unemployment.

384
00:20:32,778 –> 00:20:37,138
This leads to the next step: debts must be reduced!

385
00:20:37,138 –> 00:20:41,148
Many borrowers find themselves unable to repay their loans

386
00:20:41,148 –> 00:20:44,298
— and a borrower’s debts are a lender’s assets.

387
00:20:44,298 –> 00:20:48,749
When borrowers don’t repay the bank, people get nervous that the bank
won’t

388
00:20:48,749 –> 00:20:50,308
be able to repay them

389
00:20:50,308 –> 00:20:54,908
so they rush to withdraw their money from the bank.
Banks get squeezed and

390
00:20:54,909 –> 00:20:55,590
people,

391
00:20:55,589 –> 00:21:00,079
businesses and banks default on their debts.
This severe

392
00:21:00,079 –> 00:21:03,569
economic contraction is a depression.

393
00:21:03,569 –> 00:21:08,648
A big part of a depression is people discovering much of what they
thought

394
00:21:08,648 –> 00:21:11,088
was their wealth isn’t really there.

395
00:21:11,088 –> 00:21:13,490
Let’s go back to the bar.

396
00:21:13,690 –> 00:21:17,619
When you bought a beer and put it on a bar tab,

397
00:21:17,618 –> 00:21:23,569
you promised to repay the bartender.
Your promise became an asset of the bartender.

398
00:21:23,569 –> 00:21:28,128
But if you break your promise – if you don’t pay him back and
essentially default

399
00:21:28,128 –> 00:21:29,308
on your bar tab –

400
00:21:29,308 –> 00:21:32,648
then the ‘asset’ he has isn’t really worth anything.

401
00:21:32,648 –> 00:21:35,778
It has basically disappeared.

402
00:21:35,778 –> 00:21:39,710
Many lenders don’t want their assets to disappear and agree to debt

403
00:21:39,710 –> 00:21:40,759
restructuring.

404
00:21:40,759 –> 00:21:44,319
Debt restructuring means lenders get paid back

405
00:21:44,319 –> 00:21:48,048
less or get paid back over a longer time frame

406
00:21:48,048 –> 00:21:52,329
or at a lower interest rate that was first agreed.
Somehow

407
00:21:52,329 –> 00:21:56,888
a contract is broken in a way that reduces debt.
Lenders would rather have a

408
00:21:56,888 –> 00:21:59,418
little of something than all of nothing.

409
00:21:59,419 –> 00:22:03,450
Even though debt disappears, debt restructuring causes

410
00:22:03,450 –> 00:22:06,558
income and asset values to disappear faster,

411
00:22:06,558 –> 00:22:09,678
so the debt burden continues to gets worse.

412
00:22:09,679 –> 00:22:12,950
Like cutting spending, debt reduction

413
00:22:12,950 –> 00:22:16,009
is also painful and deflationary.

414
00:22:16,009 –> 00:22:21,940
All of this impacts the central government because lower incomes and
less employment

415
00:22:21,940 –> 00:22:27,048
means the government collects fewer taxes.

416
00:22:27,048 –> 00:22:30,210
At the same time it needs to increase its spending because unemployment
has risen.

417
00:22:30,210 –> 00:22:33,960
Many of the unemployed have inadequate savings

418
00:22:33,960 –> 00:22:36,419
and need financial support from the government.

419
00:22:36,419 –> 00:22:39,999
Additionally, governments create stimulus plans

420
00:22:39,999 –> 00:22:43,879
and increase their spending to make up for the decrease in the economy.

421
00:22:43,878 –> 00:22:47,509
Governments’ budget deficits explode in a

422
00:22:47,509 –> 00:22:51,058
deleveraging because they spend more than they earn in taxes.

423
00:22:51,058 –> 00:22:55,720
This is what is happening when you hear about the budget deficit on the
news.

424
00:22:55,720 –> 00:23:01,319
To fund their deficits, governments need to either raise taxes

425
00:23:01,319 –> 00:23:06,058
or borrow money. But with incomes falling and so many unemployed,

426
00:23:06,058 –> 00:23:09,788
who is the money going to come from? The rich.

427
00:23:09,788 –> 00:23:14,579
Since governments need more money and since wealth is heavily
concentrated in

428
00:23:14,579 –> 00:23:17,108
the hands of a small percentage of the people,

429
00:23:17,108 –> 00:23:20,378
governments naturally raise taxes on the wealthy

430
00:23:20,378 –> 00:23:24,449
which facilitates a redistribution of wealth in the economy –

431
00:23:24,450 –> 00:23:29,278
from the ‘haves’ to the ‘have nots’.
The ‘have-nots,’ who are suffering, begin to

432
00:23:29,278 –> 00:23:30,970
resent the wealthy ‘haves.’

433
00:23:30,970 –> 00:23:36,308
The wealthy ‘haves,’ being squeezed by the weak economy, falling asset
prices,

434
00:23:36,308 –> 00:23:39,940
higher taxes, begin to resent the ‘have nots.’

435
00:23:39,940 –> 00:23:43,890
If the depression continues social disorder can break out.

436
00:23:43,890 –> 00:23:47,280
Not only do tensions rise within countries,

437
00:23:47,279 –> 00:23:52,200
they can rise between countries – especially debtor and creditor
countries.

438
00:23:52,200 –> 00:23:56,039
This situation can lead to political change

439
00:23:56,039 –> 00:23:58,839
that can sometimes be extreme.

440
00:23:58,839 –> 00:24:02,629
In the 1930s, this led to Hitler coming to power,

441
00:24:02,630 –> 00:24:08,080
war in Europe, and depression in the United States. Pressure to do
something

442
00:24:08,079 –> 00:24:10,069
to end the depression increases.

443
00:24:10,069 –> 00:24:14,950
Remember, most of what people thought was money was actually credit.

444
00:24:14,950 –> 00:24:18,400
So, when credit disappears, people don’t have enough money.

445
00:24:18,400 –> 00:24:23,190
People are desperate for money and you remember who can print money?

446
00:24:23,190 –> 00:24:27,370
The Central Bank can.

447
00:24:27,369 –> 00:24:30,308
Having already lowered its interest rates to nearly 0

448
00:24:30,308 –> 00:24:34,089

  • it’s forced to print money. Unlike cutting spending,

449
00:24:34,089 –> 00:24:37,298
debt reduction, and wealth redistribution,

450
00:24:37,298 –> 00:24:42,190
printing money is inflationary and stimulative. Inevitably, the central
bank

451
00:24:42,190 –> 00:24:43,210
prints new money

452
00:24:43,210 –> 00:24:47,150
— out of thin air — and uses it to buy financial assets

453
00:24:47,150 –> 00:24:52,259
and government bonds. It happened in the United States during the Great
Depression

454
00:24:52,259 –> 00:24:56,009
and again in 2008, when the United States’ central bank —

455
00:24:56,009 –> 00:24:59,940
the Federal Reserve — printed over two trillion dollars.

456
00:24:59,940 –> 00:25:04,179
Other central banks around the world that could, printed a lot of money,
too.

457
00:25:04,179 –> 00:25:07,440
By buying financial assets with this money,

458
00:25:07,440 –> 00:25:11,679
it helps drive up asset prices which makes people more creditworthy.

459
00:25:11,679 –> 00:25:15,820
However, this only helps those who own financial assets.

460
00:25:15,819 –> 00:25:21,839
You see, the central bank can print money but it can only buy financial
assets.

461
00:25:21,839 –> 00:25:24,899
The Central Government, on the other hand,

462
00:25:24,900 –> 00:25:29,580
can buy goods and services and put money in the hands of the people

463
00:25:29,579 –> 00:25:34,519
but it can’t print money. So, in order to stimulate the economy, the two

464
00:25:34,519 –> 00:25:35,650
must cooperate.

465
00:25:35,650 –> 00:25:40,470
By buying government bonds, the Central Bank essentially lends money to
the

466
00:25:40,470 –> 00:25:41,190
government,

467
00:25:41,190 –> 00:25:44,909
allowing it to run a deficit and increase spending

468
00:25:44,909 –> 00:25:48,650
on goods and services through its stimulus programs

469
00:25:48,650 –> 00:25:53,080
and unemployment benefits. This increases people’s income

470
00:25:53,079 –> 00:25:56,240
as well as the government’s debt. However,

471
00:25:56,240 –> 00:25:59,539
it will lower the economy’s total debt burden.

472
00:25:59,539 –> 00:26:05,428
This is a very risky time. Policy makers need to balance the four ways
that debt

473
00:26:05,429 –> 00:26:06,590
burdens come down.

474
00:26:06,589 –> 00:26:13,049
The deflationary ways need to balance with the inflationary ways in

475
00:26:13,049 –> 00:26:14,710
order to maintain stability.

476
00:26:14,710 –> 00:26:18,130
If balanced correctly, there can be a

477
00:26:18,130 –> 00:26:21,479
Beautiful Deleveraging.

478
00:26:21,479 –> 00:26:25,359
You see, a deleveraging can be ugly or it can be beautiful.

479
00:26:25,358 –> 00:26:28,838
How can a deleveraging be beautiful?

480
00:26:28,838 –> 00:26:33,428
Even though a deleveraging is a difficult situation,

481
00:26:33,429 –> 00:26:37,548
handling a difficult situation in the best possible way is beautiful.

482
00:26:37,548 –> 00:26:42,210
A lot more beautiful than the debt-fueled, unbalanced excesses of the

483
00:26:42,210 –> 00:26:45,940
leveraging phase. In a beautiful deleveraging,

484
00:26:45,940 –> 00:26:51,088
debts decline relative to income, real economic growth is positive,

485
00:26:51,088 –> 00:26:56,888
and inflation isn’t a problem.
It is achieved by having the right balance.

486
00:26:56,888 –> 00:27:00,158
The right balance requires a certain mix

487
00:27:00,159 –> 00:27:04,229
of cutting spending, reducing debt, transferring wealth

488
00:27:04,229 –> 00:27:09,149
and printing money so that economic and social stability can be
maintained.

489
00:27:09,148 –> 00:27:13,638
People ask if printing money will raise inflation.

490
00:27:13,638 –> 00:27:18,878
It won’t if it offsets falling credit. Remember, spending is what
matters.

491
00:27:18,878 –> 00:27:24,248
A dollar of spending paid for with money has the same effect on price as
a dollar

492
00:27:24,249 –> 00:27:25,969
of spending paid for with credit.

493
00:27:25,969 –> 00:27:31,298
By printing money, the Central Bank can make up for the disappearance of
credit

494
00:27:31,298 –> 00:27:33,079
with an increase in the amount of money.

495
00:27:33,079 –> 00:27:38,509
In order to turn things around, the Central Bank needs to not only pump
up

496
00:27:38,509 –> 00:27:39,519
income growth

497
00:27:39,519 –> 00:27:43,848
but get the rate of income growth higher than the rate of interest on
the

498
00:27:43,848 –> 00:27:45,098
accumulated debt.

499
00:27:45,098 –> 00:27:48,378
So, what do I mean by that? Basically,

500
00:27:48,378 –> 00:27:52,308
income needs to grow faster than debt grows. For example:

501
00:27:52,308 –> 00:27:56,079
let’s assume that a country going through a deleveraging has a debt-to-

502
00:27:56,079 –> 00:27:58,579
income ratio of 100%.

503
00:27:58,579 –> 00:28:03,658
That means that the amount of debt it has is the same as the amount of
income the

504
00:28:03,659 –> 00:28:05,799
entire country makes in a year.

505
00:28:05,798 –> 00:28:09,009
Now think about the interest rate on that debt,

506
00:28:09,009 –> 00:28:11,159
let’s say it is 2%.

507
00:28:11,159 –> 00:28:15,028
If debt is growing at 2% because of that interest rate and

508
00:28:15,028 –> 00:28:15,690
income

509
00:28:15,690 –> 00:28:20,230
is only growing at around only 1%, you will never reduce the debt
burden.

510
00:28:20,230 –> 00:28:24,808
You need to print enough money to get the rate of income growth above
the

511
00:28:24,808 –> 00:28:25,950
rate of interest.

512
00:28:25,950 –> 00:28:30,720
However, printing money can easily be abused because it’s so easy to do
and

513
00:28:30,720 –> 00:28:33,048
people prefer it to the alternatives.

514
00:28:33,048 –> 00:28:36,200
The key is to avoid printing too much money

515
00:28:36,200 –> 00:28:41,110
and causing unacceptably high inflation, the way Germany did during its

516
00:28:41,109 –> 00:28:43,128
deleveraging in the 1920’s.

517
00:28:43,128 –> 00:28:48,269
If policymakers achieve the right balance, a deleveraging isn’t so
dramatic.

518
00:28:48,269 –> 00:28:51,339
Growth is slow but debt burdens go down.

519
00:28:51,339 –> 00:28:54,470
That’s a beautiful deleveraging.

520
00:28:54,470 –> 00:28:59,829
When incomes begin to rise, borrowers begin to appear more creditworthy.

521
00:28:59,829 –> 00:29:02,999
And when borrowers appear more creditworthy,

522
00:29:02,999 –> 00:29:08,509
lenders begin to lend money again.
Debt burdens finally begin to fall.

523
00:29:08,509 –> 00:29:13,499
Able to borrow money, people can spend more. Eventually, the economy
begins to

524
00:29:13,499 –> 00:29:14,399
grow again,

525
00:29:14,398 –> 00:29:18,008
leading to the reflation phase of the long term debt cycle.

526
00:29:18,009 –> 00:29:22,490
Though the deleveraging process can be horrible if handled badly,

527
00:29:22,490 –> 00:29:26,278
if handled well, it will eventually fix the problem.

528
00:29:26,278 –> 00:29:29,579
It takes roughly a decade or more

529
00:29:29,579 –> 00:29:33,668
for debt burdens to fall and economic activity to get back to normal

530
00:29:33,669 –> 00:29:37,899

  • hence the term ‘lost decade.’

531
00:29:37,898 –> 00:29:42,719
Of course, the economy is a little more complicated than this template

532
00:29:42,720 –> 00:29:43,639
suggests.

533
00:29:43,638 –> 00:29:48,849
However, laying the short term debt cycle on top of the long term debt
cycle

534
00:29:48,849 –> 00:29:52,628
and then laying both of them on top of the productivity growth line

535
00:29:52,628 –> 00:29:55,918
gives a reasonably good template for seeing where we’ve been,

536
00:29:55,919 –> 00:29:58,919
where we are now and where we are probably headed.

537
00:29:58,919 –> 00:30:03,019
So in summary, there are three rules of thumb that I’d like you to take
away

538
00:30:03,019 –> 00:30:03,720
from this:

539
00:30:03,720 –> 00:30:08,220
First:
Don’t have debt rise faster than income,

540
00:30:08,220 –> 00:30:11,429
because your debt burdens will eventually crush you.

541
00:30:11,429 –> 00:30:16,059
Second:
Don’t have income rise faster than productivity,

542
00:30:16,058 –> 00:30:19,158
because you will eventually become uncompetitive.

543
00:30:19,159 –> 00:30:24,000
And third:
Do all that you can to raise your productivity,

544
00:30:24,000 –> 00:30:29,028
because, in the long run, that’s what matters most.

545
00:30:29,548 –> 00:30:34,079
This is simple advice for you and it’s simple advice for policy makers.

546
00:30:34,079 –> 00:30:38,470
You might be surprised but most people — including most policy makers —
don’t pay enough attention

547
00:30:38,470 –> 00:30:39,509
to this.

548
00:30:39,509 –> 00:30:44,058
This template has worked for me and I hope that it’ll work for you.

549
00:30:44,058 –> 00:30:46,379
Thank you.

相关文章