5min chapter

The Rest Is Money cover image

69. Does debt really matter?

The Rest Is Money

CHAPTER

Analyzing the Significance of National Debt

Exploring the complexities of national debt, this chapter examines its impact on public services like schools and hospitals, considers the rise in debt since 2010, and discusses the relationship between debt, interest rates, and economic growth.

00:00
Speaker 2
If you had to predict what you think over the next 10 years, China's growth might look like, what would you predict?
Speaker 1
3%. An annual rate of 3%. That seems reasonable. That is actually slightly higher now than the developed countries. The developed countries grow around 2%. Or maybe even 1.5% for some of these very rapidly aging countries. But I think China, 3%, that's not me going out on a limb either. That's sort of a consensus forecast, but I think that that's kind of what we're looking at. Also, you know, there's research on these economic slowdowns that developing countries experience. Most countries experience 2. Occasionally they'll experience 3, but usually 2. And the first slowdown happened to China in the early 2010s. The growth basically dropped from 10% to 6%. So you had a 4 point slowdown. And then so in the 2010s, we came to think of China as an economy that grows at 6%, rather than an economy that grows at 10%. But 6 and 10 are both so much higher than our growth rate that maybe we didn't notice. Also, a percentage growth rate when you're, you know, China was richer in the 2010s than it was in 2000s. So we just saw much more stuff. You know, we saw these forests of skyscrapers and these oceans of cars and ships, you know, like being built. And so that 6% still seemed big and majestic, even though it actually represented a substantial slowdown. Now China has had the second slowdown right on time. Actually, if you look at the paper that predicts this by Barry Eichen Green and then also Park and Shin, they predict the timing of this very well. And so China has now undergone its second slowdown. And the 3% will probably peter out to 2% in the 30s. But then, but the era of rapid Chinese catch up growth is pretty much is done. It's over. Yeah.

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