The Intelligence from The Economist
Invaluable bonds: rising borrowing costs
Oct 17, 2023
Henry Kerr, Economics editor for The Economist, sheds light on the implications of rising borrowing costs on government budgets and potential financial blowbacks globally. James Miles, a China writer for The Economist, reveals the surprising strategy of the Chinese Communist Party using rap music to connect with the youth. The conversation dives into the financial strains faced by governments and the innovative ways political entities are engaging younger generations, showcasing a blend of economics and culture in action.
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Quick takeaways
- Rising borrowing costs for governments may lead to decreased government spending, higher taxation, or inflation, and highlight the need to tackle budget deficits seriously.
- China's Communist Youth League appeals to young people through nationalist messaging, career opportunities, and advantages in getting government or state-owned enterprise jobs.
Deep dives
Rising government bond yields pose challenges to global economies
The rising cost of borrowing in financial markets for governments is a growing concern, as higher borrowing costs mean governments have less money for other expenses. This may lead to decreased government spending, higher taxation, or inflation. The increase in borrowing costs is influenced by various factors, including rising interest rates to combat inflation and investors' unease about high government debt. The effects of higher bond yields are being felt globally, particularly in Europe, where concerns about the ability to afford higher borrowing costs are prominent. The situation highlights the need for governments to tackle budget deficits seriously and consider the trade-offs associated with balancing spending and taxation.
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