Watch the video above and talk about it with a group or mentor. Learn more.
John Green explains the US debt problem in 4 minutes.
Key Points:
- There are two main types of debt: unsecured and secured debt. Unsecured debt is debt to be paid back on good faith. Secured debt is debt that is secured with collateral, meaning that if the debt is not paid, a house, car, or something else can be taken by the lender.
- Gross domestic product (GDP) is a measure of the total annual economic output of a country.
- When it all boils down, the only thing backing currency in the world is trust. Can lenders trust borrowers to pay back their loans? Even governments default on loans.
- As government debt increases, more money is needed to service it (higher interest rates!) which means that spending must be cut and taxes must be raised. These things can slow the economy and decrease government revenue.
Quote This:
Blessed are the young for they shall inherit the national debt. -Herbert Hoover
Talk About It
- What is your initial reaction to this topic? What jumped out at you?
- What is the difference between collateralized debt and unsecured debt?
- Do you think it’s a problem that America’s debt-to-GDP ratio is 100%? Why or why not? What do you think we should do about it?
- “All sovereign debt is basically unsecured debt.” Explain this statement. Do you agree?
- What happens when a country’s debt gets more expensive? Why hasn’t America’s debt gotten more expensive?
- Why do you think the world still trusts America to pay its debts? Do you think it’ll ever change?
- Write a personal action step based on this conversation.
This topic is adapted from the Vlogbrothers YouTube channel.