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Economist Podcasts
Invaluable bonds: rising borrowing costs
Oct 17, 2023
Henry Tricks, Economics editor for The Economist, and James Miles, the publication's China writer at large, dive into pressing fiscal concerns. They discuss the impact of rising borrowing costs on government budgets, exploring potential spending cuts and tax increases. On a lighter note, they examine how the Chinese Communist Party engages youth through modern cultural strategies, including rap. Meanwhile, the animated series 'Bluey' captivates families worldwide with its humorous insights into parenting dynamics.
25:04
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Quick takeaways
- The rising cost of borrowing for governments poses challenges for budgets, leading to less spending, higher taxation, or inflated inflation as ways to manage debt interest.
- China's Communist Youth League is revitalizing its image through popular figures like rapper Guy to appeal to young people and maintain ideological control.
Deep dives
Government Bond Yields and Budget Challenges
The rising cost of borrowing for governments and the potential for higher interest rates and bond yields pose challenges for government budgets. Higher borrowing costs can lead to less government spending, higher taxation, or inflated inflation as ways to manage debt interest. The increase in borrowing costs is attributed to factors such as central banks raising interest rates, nervousness among investors about high government borrowing, and political fragmentation in the US. The impact of higher yields is greater due to the increased size of government debt since the global financial crisis. Balancing budgets is a difficult task that requires tough trade-offs.
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