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Ben Miller

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2024-04-22
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2024-04-22
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  1. “Well, I'm not. I mean, I guess I'm not taking a view of whether it's right or wrong. It's just that the question is what we can afford. The analysis is, okay, if you have 350% debt to GDP, right, which is three and a half times the amount of GDP to debt, if the interest rate is double. Can the US afford to carry that?”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  2. “Said the word responsible, and I think that it definitely is possible that the growth in the federal debt now is irresponsible, but there also is a chance, like during the Great Depression, it was irresponsible that there was negative credit creation. It's a balance and it's also possible for there not to be too much. Although I'd say it's kind of a hard argument to say that on the federal government side, there's not enough debt. It's either the right amount or too much or way too much. But maybe it is not enough. I don't know.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  3. “Banks and governments were growing their debt by sort of normal high rates, which historically is about 8% a year. So it was only households that were constrained, responsible, however you want to describe it. And that's why households are so healthy today. And also, I think that's also maybe potentially why households are feeling under strain because they can't borrow as much. And so as a result, like the individual took the pain over the last decade and a half and businesses and banks and the government really hadn't, didn't.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  4. “Yeah, yeah. So a lot of this analysis are like fractals. So we're talking about the biggest fractal, which is the US, well, and you can then go down into each sector. So previously I did like a commercial property fractaling up to like all business debt, you know, fractaling up to the US. But the strains that we're talking about could happen in a sector. Like in 2008, the sector that couldn't afford its debt to income ratio was the banking sector, right? And then that cascaded to the household sector. One sector can break because of these ratios. And so inside that, though, actually, the only sector that really constrained deck growth was households. From 2008 to 2023, household debt growth was like a couple percent, was negligible.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  5. “Since 2008, yes, 2008 for all debt. There was a huge debt boom from the 80s until 2008 on pretty much all sectors. Since then, debt-to-GDP for all debt, as you say, good point, has been flat. However, federal debt to GDP has still exploded. So there actually has been much more moderate growth in private sector debt. So corporate bonds, mortgages, and the like. And the U.S. household sector is less levered now than it was in 2000.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  6. “That's actually not true. So, this is the debt to GDP ratio. So in 1980, there was like, let's say, half as much debt. Since 2008, it's been flat, it's gone down a little bit, but more or less flat. So actually GDP has been growing as fast as debts”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  7. “Yes. So I think what people say is that there is a debt bubble. What they may be saying is that the amount of credit growth and money growth because credit and money are very similar, in some cases literally the same thing, as we just said. That has been outpacing the growth of the economy. So money and credit is growing faster than the economy.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  8. “This is all debts, as you said. And so going back to this chart, bank debt, I think it's $21 trillion in bank debt you have there. I think the amount of bank deposits in the country are $17 trillion. But again, everything that we call bank debt is literally money, bank deposits. Of course, that's a liability for banks, an asset for you and me, but it is literally what we call money. So there's this concept of like debt is money, right?”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  9. “Total debt growth has been slowing in the US. Consistently slowing since the eighties, and that is shocking. Like it's just the opposite of everybody believes. Everybody believes that there's debt growth has been a death spiral. And instead, debt growth has actually been at historic lows across all of the United States”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  10. “Government debt was 100% of GDP, and the private sector had zero debt. There was no debt for the rest of the economy, like it wouldn't matter. It wouldn't matter. And so that's like the main insight. And then once you go look at it in totality rather than looking at government versus just, oh my gosh, government debts are spiraled in the last 15 years. Your takeaways, my takeaways were totally different. And they defy the popular narrative. So this is like the all the debt in the US. It's a little bit out of dates now about 99 trillion. So this is everything. Businesses, households, banks, and then government. And so the question I ask, if you go to the next slide, the question I asked was, you know, was there faster debt growth in the 90s or in 2008, 2023? I think the popular narrative is that recently there was huge debt growth because the government grew its debt so much. Actually.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  11. “To me, it's obvious because if the government wanted to pay down their debt, they could tax the private sector or print money, right? Either way, you can lower the debt load of the government by taking from the private sector. And then vice versa, the government can take on debt of the private sector, like what happened in the 2008 financial crisis that essentially the US government monetized took and nationalized a lot of the debts of the private sector. And they arguably did that again in COVID when they put $6 trillion into the economy to sort of stop the private sector from falling apart. And they nationalized private debts. So the debt load can move between the public and private sector based on politics and policy. And so you have to look at totality. You can't just look at U.S. just as an example, if US”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  12. “Yeah, so there's two points here. One, when I first started bringing this up, people started saying, well, it doesn't make sense to look at public and private debt combined. So the government now has increased the amount of debt to GDP to 100%. But why would you look at that in totality?”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  13. “Yes. And I think what you're referring to is let's put up a chart of US federal debt to GDP, which was, let's say, around 30 to 40 percent in the 1970s is now around 120%. So that is a incredible rise, but that is only looking at U.S. federal government debt. There is also the private debt creation. And your findings are that the growth of that in the 1980s and 1990s and 2000s before 2008 was much, much bigger than it is now.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  14. “All U.S. debt and all U.S. sort of income, which would be GDP or GNI, whichever one you want to use, when you look at it in totality, a lot of the conclusions people run around in sort of popular FinTwit or popular economic policy wonks, they're discordant. They're not consistent with the data. If you look at the US as a whole, it was just really shocking to me.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  15. “And that's the same thing true with all commercial real estate. And then if you go and expand it out, look at all securitization aspect securities, you start looking at broader and broader borrowing bases, corporate sectors, you start seeing this pattern repeat. And so I just followed that pattern up and up and up. And I finally got to the entire United States. I just couldn't and was interesting because the Fed data, the Fed looks at the data of debt to collateral the way that like a lender does. So lenders will constrain you two ways, right? They'll look at LTC, LTV. So loan to value. So they may say 80% or 60%. And they'll also look at your debt-to-income ratio or in commercial real estate, it's called DSCR debt service coverage ratio, but it's a ratio of your income to the debt service, the annual mortgage payment. And there's no data on that for the country. Like nobody aggregates all.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  16. “And so it was not about the, you know, most people think about like there when they buy a home, they think about 80% mortgage. Can they afford, do they have enough equity to write the check? And what really matters is the DTI, the debt-to-income ratio, like that's the thing that's constraining every single home buyer, like the primary challenge you're trying to buy a home today. It's not that you don't have enough equity. Not that you can't get the debt, but that the debt-to-income ratio you need at 7% mortgage is Constraining most people from buying a”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT

  17. “The real estate industry went into a bit of an anaphylactic shock last year when interest rates went from zero to five and a quarter, which meant you were borrowing at like six to eight, six to ten, depending on the spread. The challenge felt like a unique challenge in real estate. And that was that you had a property and maybe that property was worth $10 million. and you had a million dollars of income a year on it. So 10% a year. Like we had loans with tons of banks. So this happened to us on a bunch of properties where you have a loan, a loan might be for us, we were low leveraged, like maybe only 60% leverage or something. So the loan 6 million and the property is worth 10. And the interest rate doubles. And so before you might have been paying 3% and now you're paying six.”

    2024-04-22 · Forward Guidance · Can The U.S Handle High Interest Rates Past 2024? | Ben Miller · IDENTIFIED FROM THE TRANSCRIPT