AI Summary
5 min readIn early 2024, a group of economists on France’s official Council of Economists published a report with a warning that was, by their own admission, fairly mild. They did not tell the French government it needed to slash its debt. They just asked it to stop adding to the debt — to balance the budget gradually over the next seven years. The lead author, NYU professor Thomas Philippon, thought the proposal was modest enough to be credible. “I thought if somebody like me says, well, maybe it is time to actually do something, perhaps it would have a tiny bit more credibility,” he says. The French government did nothing. Since then, France’s debt problem has gotten worse, and a more ominous signal has appeared: investors are starting to treat France as a riskier bet than Greece. This is the story of how one of the world’s richest countries entered a danger zone — and what it might mean for every other country on a similar borrowing spree.
The borrowing spree that became the new normal
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What you'll learn
- 1 (00:20) **The Friend Who Can't Stop Borrowing** - The episode opens with an analogy comparing a financially irresponsible friend to the governments of rich countries like the US, UK, and France, who have been racking up record debt.
- 2 (02:24) **The French People's Response: "There is Money"** - NPR's Eleanor Beardsley reports from the "cost of living protests" in France, where citizens are demanding more government spending, not less.
- 3 (05:12) **The Great International Borrowing Spree** - The hosts introduce the historical context: how borrowing on top of borrowing became the new normal for rich countries.
- 4 (08:32) **How France's Debt Climbed** - Tomas Philippon explains the specific history of France's debt, which has risen in waves since the 2000s.
- 5 (10:02) **The Era of Cheap Loans and "Learning to Love Debt"** - The other side of the borrowing spree was a long period of near-zero interest rates, which made borrowing essentially free for governments.
- 6 (13:01) **The Mistake: The End of Cheap Money** - The zero-interest-rate world ended due to inflation, wars, and other crises, making it much more expensive for everyone to borrow.
- 7 (14:14) **A Warning from France's Own Economists** - In 2024, Tomas Philippon and other economists on the French Council of Economists published a report warning the government to stop adding to the debt.
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Show Notes
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.
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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.
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