The Original Sin of Sovereign Debt: Budget deficits, Debt Crisis
In this episode of 2050 Investors, Kokou Agbo-Bloua looks at how governments can manage their finances in the face of high interest rates and how to avoid the metaphorical “original sin” of endemic sovereign debt and budget deficits.
$25 trillion! This is the money spent by governments and central banks to support the global economy during the pandemic.
Where did this money come from, what is the impact of this spending and is it long term?
These are important questions to consider as half of the world's population goes to the polls this year and political candidates try to woo voters with lavish promises of more spending.
Even if we are near full employment, wages are rising, and inflation is almost where the central bank wants it, we still need to think about the effects of this approach — there's no such thing as a free lunch!
So in this episode of 2050 Investors, Kokou Agbo-Bloua looks at how governments can manage their finances in the face of high interest rates and how to avoid the metaphorical “original sin” of endemic sovereign debt and budget deficits.
Later in the episode, Kokou discusses with Anatoly Annenkov, Societe Generale's Senior Economist for Europe, the relationship between public debt and central banks, how central banks can help stabilise sovereign debt crises and why they need to be independent.