All Else Equal: Making Better Decisions Ep47 “Is the US National Debt Sustainable?” with Mohamed El-Erian
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Sep 18, 2024 
Mohamed El-Erian, former CEO of PIMCO and chair of the president's Global Development Council, discusses the sustainability of the US national debt. He explores alternative measures of debt, beyond the debt-to-GDP ratio, and emphasizes historical context and investor confidence. El-Erian highlights the economic challenges posed by demographic shifts and the role of technological advancements like AI in shaping future growth. The conversation raises critical questions about inflation targets and the interplay of national debt with geopolitical stability.
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Debt-to-GDP vs. Debt-to-Assets
- The US national debt-to-GDP ratio is alarmingly high, exceeding 120%.
- However, debt relative to assets like the stock market and housing has remained flat.
Conflicting Metrics
- While debt-to-GDP has surged, other metrics like debt-to-assets and interest-to-GDP are flat.
- This discrepancy highlights the limitations of debt-to-GDP during non-stationary periods.
US as "Cleanest Dirty Shirt"
- The US enjoys favorable interest rates due to its relative economic stability compared to other nations.
- This makes it attractive for foreign investment, despite its fiscal challenges.