Written by a model from the transcript; not yet reviewed.
Over the past decade and a half, rich countries including the United States, the UK, France, and Italy have engaged in an unprecedented international borrowing spree, pushing national debts well past historical safety limits like the old 60% of GDP rule. While low interest rates after the 2008 financial crisis made debt feel manageable or even free, rising global inflation and interest rates have snapped economies back to reality. Economists Tomas Philippin and Olivier Blanchard explain how France has become the canary in the coal mine, as nervous investors demand higher bond yields due to political dysfunction and protests over proposed budget cuts, threatening a classic debt spiral.
Hosts introduce the episode and announce sponsor messages.
The hosts discuss growing concerns about France’s ability to repay its debt.
French protests over spending highlight political challenges to debt management.
Explains how low interest rates enabled high borrowing in the 2000s and 2010s.
Blanchard argues that low rates allow countries to grow past debt without repayment.
Investors’ spread and fear index show why France is seen as riskier than Greece.
France’s fragmented politics raise borrowing costs and threaten debt sustainability.
Discusses fiscal tightening or European Central Bank intervention as options for France.
Comparisons between France and U.S. debt dynamics and political credibility.
Rich Nations Racking Up Debtdata
Rich nations like the US, UK, Italy, France, and Canada have accumulated record amounts of debt, with Canada owing over $1 trillion.
Why France Scares Investorsinsight
Investors are uniquely spooked by France despite Italy and Greece having higher debt-to-GDP ratios and the US running larger budget deficits.
The Debt Rollover Theoryinsight
Economist Olivier Blanchard argued that if interest rates are low enough, governments can issue new debt to pay old debt and never fully repay it.
The Magic Number Fallacyinsight
Economists explain that there is no magic tipping point for debt as long as a country can stabilize it and grow faster than the interest rate.
The interest rate on 10-year French bonds jumped from around 3 percent to nearly 5 percent, the highest level since the 2000s.
France Riskier Than Greeceinsight
Investors now charge France a higher interest rate than Greece, even though Greece has a higher debt-to-GDP ratio because Greece's debt is on a downward trajectory.
The National Debt Doom Loopinsight
Higher interest rates demand larger payouts, worsening the government's financial trajectory and triggering a self-reinforcing market panic similar to a bank run.
“The big question now, how much debt is too much debt?”
“Interest rates stayed so low for so long that eventually, you started to hear very important mainstream economists talking about how they learned to stop worrying and maybe even love the debt.”
“The spread or this fear index has remained elevated. And then in late September, that's when the fear index spiked.”
“If countries can borrow this cheaply, then maybe they won't ever need to pay off their debts.”
In recent months, there have been serious whispers about an outrageous possibility: that one day soon, France — the seventh largest economy in the world — might not be able to pay back its debts. Right now, protesters in France are complaining about crumbling schools, the lack of teachers, and the overall high cost of living. But the government is struggling to find the money to address all the country’s problems. France is in a lot of debt. It has been borrowing record amounts of money. So have many other countries including the U. S., the U. K., Italy, Canada. For more than a decade, there has been an international borrowing spree going on. Now, as interest rates climb, that borrowing spree might have to come to an end. And the consequences could get ugly. Live Show: Planet Money Live at Kilkenomics. Kilkenny, Ireland Nov. 6th - 7th https://kilkenomics.com/ Read: Our book: Planet Money: A Guide to the Economic Forces That Shape Your Life https://lnk.to/i3AukBdD Our weekly longform Planet Money newsletter https://n.pr/3zrFvUBOur weekly Indicator round-up newsletter https://www.npr.org/newsletter/indicator Follow: Instagram https://n.pr/3FqLuwsTikTok https://n.pr/3sGZdrqYouTube https://lnk.to/iCVDaW3CFacebook https://n.pr/3h92GwS Support public media with NPR+ and enjoy perks for over 25 podcasts like this one. This show’s perks include bonus episodes and sponsor-free listening. Learn more atplus.npr.org http://plus.npr.org/. This episode was hosted by Jeff Guo and Erika Beras. It was produced by Sam Yellowhorse Kesler and edited by Marianne McCune. It was fact-checked by Charlotte Isidore and Sierra Juarez. Jimmy Keeley and Travis Hagan engineered the show. Alex Goldmark is the executive producer of Planet Money. See pcm.adswizz.com https://pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. NPR Privacy Policy https://www.npr.org/about-npr/179878450/privacy-policy
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