00:02:01 · Erika Beras, Eleanor Beardsley, Jeff Guo, Julie Biat
[00:02:01] S1: The problem is France needs to keep borrowing money. It is running a huge budget deficit. France has an aging population, rising health care costs, and an expensive pension program. And right now, as you may have heard, maybe from NPR's Eleanor Beardsley, the French people are taking to the streets, not to tell their government to cut back, but to keep spending more. [00:02:26] S3: The farmers are asking for money. The workers are asking for money. The students are asking for money. Everybody's asking for money. There's money, and and we want it. You know? [00:02:35] S2: But is there money? [00:02:36] S3: Yeah. You know, no. Well, they have to borrow money. [00:02:41] S2: Eleanor's followed these protests since they started in September. At first, it was students in France's public schools complaining about the lack of teachers, the crumbling roofs, very real concerns. [00:02:51] S4: Just go to university and look at everything like [00:02:54] S2: That was Sydney jacin. Then as these protests were expanding, the French government revealed its proposal to actually trim some of the budget, spend less, and that really set people off. [00:03:06] S3: So now it's it's really transformed into a massive societal protest. They call them the cost of living protests. They've been absolutely huge. Like, last Saturday, it was like a coursing human river down this this boulevard. I mean, you couldn't even get across it.
00:03:06 · Eleanor Beardsley, Erika Beras, Jeff Guo, Julie Biat, Olivier Blanchard, Thomas Philippon
[00:03:06] S3: So now it's it's really transformed into a massive societal protest. They call them the cost of living protests. They've been absolutely huge. Like, last Saturday, it was like a coursing human river down this this boulevard. I mean, you couldn't even get across it. [00:03:21] S1: In late October, some of the protests got violent. There was looting. There was arson, and some police got violent. Eleanor got tear gassed at one point. But she says, for the most part, the hundreds of thousands of people marching in the streets have been peaceful. They're just frustrated. And to them, all this talk about France potentially running out of money seems like an excuse. [00:03:44] S2: Have any of the protesters that you talked to, have any of them said anything about, I don't know, France's enormous debt, the budget deficit? [00:03:52] S3: No. Not one. You ask people about the debt out there, and they're like, that... That's not our that's not our problem. That's up to the government to deal with. Or they say debt is just... One woman told me debt is just used to keep people in line. [00:04:03] S2: Eleanor chatted for a bit with this protester. She's a woman in her fifties. Her name is Julie Biat. And Eleanor asked her [00:04:10] S4: Cancel the debt. [00:04:10] S2: Should France just stop paying [00:04:12] S5: its debts? [00:04:13] S4: Yeah. Why not? There is a bunch of monies in the world. Don't say there's no money. It's not the question that there is no money. There is so much money. [00:04:23] S2: And look, Julie does have a point. [00:04:25] S6: She's at Rome.
00:04:25 · Thomas Philippon, Jeff Guo, Erika Beras, S0, S7
[00:04:25] S6: She's at Rome. [00:04:26] S2: There is a lot of money in the world. It's just that investors are increasingly nervous about lending it to the French government. [00:04:33] S1: And there is something economically strange about that. Why are investors so spooked by France specifically? Like, sure, the French government does owe a lot of money, but relatively speaking, Italy and Greece are even deeper in debt. And sure, the French government keeps spending more than it collects in taxes, but the budget deficit in The US is currently worse. [00:04:57] S2: So what is it about France that has investors so worried that we are talking about a potential debt crisis? Or is the better question, why haven't investors gotten spooked by all the rest of us, all the other countries that are also on this runaway borrowing spree? Hello, and welcome to Planet Money. I'm Jeff Guo. [00:05:16] S1: I'm Erika Beras. Today on the show, how borrowing on top of borrowing, on top of borrowing became the new normal for countries around the world. [00:05:25] S2: And what all those countries, including The US, might learn from what is going wrong in France. [00:05:39] S0: Stay tuned for the following announcements and messages from our sponsors. [00:05:43] S7: This message comes from Capital One. Capital One offers checking accounts with no fees or minimums. What's in your wallet? Terms apply. See capital1.com/bankguy for details. Capital One NA, member FDIC.
00:05:43 · S7, S0, Jeff Guo
[00:05:43] S7: This message comes from Capital One. Capital One offers checking accounts with no fees or minimums. What's in your wallet? Terms apply. See capital1.com/bankguy for details. Capital One NA, member FDIC. [00:05:58] S0: This message comes from Babson College. The world needs entrepreneurial leaders, and you can become one at Babson College. Gain the skills to lead, motivate, and inspire through a specialized master's or MBA program with full time, part time, and online options. Turn ideas into action with a graduate program that caters to your professional needs and fits your lifestyle. Ranked number one in entrepreneurship by US News and World Report. Visit babson.edu/gradprograms. [00:06:28] S7: This message comes from LinkedIn. Owning a small business comes with a lot of challenges and means juggling multiple things at once. It's even harder to do it efficiently. But with LinkedIn, you get all the tools you need to grow in one place. With LinkedIn, simplify your sales, marketing, and hiring so that you can actually run your small business. Learn more at linkedin.com/planetmoneyshow. [00:06:52] S2: There has been this huge international borrowing spree going on where all these rich countries are taking on more and more debt, and it wasn't always like this.
00:06:52 · Jeff Guo, Erika Beras, Thomas Philippon
[00:06:52] S2: There has been this huge international borrowing spree going on where all these rich countries are taking on more and more debt, and it wasn't always like this. [00:07:02] S1: Back in the nineteen nineties, economists like to say that if you are a country with an advanced economy, then your national debt shouldn't exceed 60% of your GDP. That was considered the upper limit of SAFE. So like in the early two thousands, The US was at around 54%. If your government was borrowing more than that, then your country was venturing out onto thin ice. [00:07:23] S2: These days, a lot of rich countries have blown way past that number. The UK is at one zero two. The US is at one twenty six. Italy is at, like, one thirty seven. [00:07:35] S6: You know, we are all testing the limits. [00:07:37] S2: Thomas Philippon is a professor at NYU. He says, not since World War two have we ever seen so many rich countries borrow so much money for such a long period of time. And now, Thomas says, we're all just watching to see what level of borrowing and spending is gonna put a country in danger. Like, you know, boop, push it over the edge. [00:07:56] S6: It's like the penguins and the orcas. One is gonna be the first one to find out where the limit is. [00:08:02] S2: So I guess in this analogy, is France the penguin that's fallen off the iceberg right now? [00:08:07] S6: Yeah. Potentially, it could be.
00:08:07 · Thomas Philippon, Erika Beras, Jeff Guo
[00:08:07] S6: Yeah. Potentially, it could be. [00:08:09] S1: By the way, we know that this is not an entirely accurate description of how penguins behave in the wild, but we did not call up Thomas because he studies penguins. Called him up because he is one of the world's leading experts on macroeconomics and also a longtime adviser to the French government. He serves on this fancy French council of economists. Over the past twenty years, he has been watching France's debt climb higher and then higher and then higher. [00:08:36] S2: He says the story goes like this. Back in the two thousands, France's national debt was hovering around that upper limit of 60% of GDP. That was the rule if you wanted to join the euro because Europe only wanted economically healthy countries to share their currency. [00:08:51] S1: But then in 2008, there was the global financial crisis, and France had to borrow a ton of money to fund its economic stimulus just like a lot of other countries did. And after the crisis, France did not pay down its debt. It just kept borrowing, just like a lot of other countries did. [00:09:13] S2: By 2020, France's debt had reached more than 100% of GDP. [00:09:18] S6: And then COVID comes. And boom. [00:09:21] S2: When COVID hit, France then had to borrow a ton more money, just like a lot of other countries, to pay for the pandemic response. [00:09:29] S6: That's how you end up with, one hundred and twenty percent of debt to GDP today. [00:09:34] S2: And a 120%, that's like... I feel like a decade, two decades ago, those were unthinkable numbers.