Hvor Har Mette Frederiksen 400 MILLIARDER Fra?

Where has the prime minister of Denmark, Mette Frederiksen, found 400 billion kr for financial support packages? And are we going to pay more in taxes? My name is Martin and welcome to Sindssygt Spændende (Insanely exciting) During the last couple of months, the prime minister of Denmark Mette Frederiksen has come with 5 big financial support packages, which is going to cost 400 billion kr. These packages secure money for employers, better loan conditions for companies and other financial benefits. But why? In Denmark we have had an increase in unemployment of 46.000 people since the 11th of March. That means that we are now 180.000 unemployed. That’s 20.000 more than during the financial crisis. If the government did not provide these financial support packages, the financial consequences would be much worse. But how many money can the government use? The state has two types of expenses. Running costs and one time costs. And the same goes for earnings.

01:11 - Running costs are costs that need to be paid year after year. The politicians vote on what to use money on year after year. Fx. how much nurses are paid. This has to be in the yearly budget. To cover the costs of running expenses the state uses running earnings like taxes. One time costs can be the building of a new bridge or to cover a crisis like the one we see now. Can extra taxes cover financial support packages? No. Not in the short term.

The purpose of having financial support packages is to put more money into people’s hands, not take more from them. Long term the taxes might be raised to cover some of the costs. The money to these packages are of course not free. But where does the money come from in the first place then? One time costs will be paid with one time earnings. This could be the sale of oil or the sale of DONG (A Danish energy company) We are going to use 400 billion kr on this corona crisis, but how much did we get from the sale of DONG? Just so we can compare the numbers In 2013 the danish state sold 19 % of DONG to Goldman Sachs (American bank) for 8 billion kr.

8 BILLION kr! That’s nothing compared to 400 billion kr that we need now. And just to clarify, since the sale of DONG, the danish shares in DONG have risen with 55 billion kr. So to have Goldman Sachs on the team was a good choice. Back to the one time earnings. The state doesn’t have enough one time earning to cover these financial support packages. So where does the money come from? Where do we get 400 billion kr?? Hmmm… What if the government just printed a lot of money and gave them to people? Actually, it’s not the danish government who owns the danish currency.

It would be a bad idea if a government can both print and use money. We have an independant place that controls this, the danish national bank. Sowhy cant the danish national bank just print some more money? Well… If there is more money in the general population, the people will have more money to spend. That means that Netto can put the price up on a liter of milk and you can ask your boss for more pay. This thing is called inflation. With inflation people get more money, but the money are worth less. So we’re back to square one.

03:56 - Another consequence of printing more money is that it will make the exchange price of the danish kr less. If an american investor wants to spend 1 million dollars buying danish kr, she will want more danish kr, now that there are more bills in the public. Therefore the price of buying one danish kr goes down. A fall in the exchange rate can actually be good for an economy. If the danish exchange rate falls, it will be cheaper for other countries to do business with Denmark. Fx.

if we in Denmark sell a windmill for 10 million kr and the exchange rate falls by 50%, it will be 50% cheaper to buy a windmill if you are a foreign investor. Actually, they have done something similar in China. They have manipulated their exchange rate to make it cheaper for foreign countries to buy stuff from China. Okay, back to the national bank. Aside from the ability to control the danish currency, the national bank also works as a bank for the danish state. If the state has some extra earnings they can put it in the national bank and if the state needs some money they can loan some.

05:26 - Under this corona crisis, the state really needs to loan some money. But if the national bank can’t just print out a lot of new money, where does it get money from? A big part of the money comes from loans. The national bank lends the money from pension funds and private investors. This is done by selling ‘bonds’. When you buy a bond from the national bank, you get a piece of paper saying how much the national bank owes you and that you are entitled to a yearly interest. The interest is determined by how much you as an investor trust that the national bank will be able to repay you in the future.

06:05 - Do you remember when the greek state went bankrupt? Back then, you could invest in a greek bond with really high interest, because the risk of the Greek state not being able to pay back was really high. Denmark has what’s called a “triple-a” credit score. Triple a means that you can trust that the danish national bank will pay you back. There is 3 big international credit rating companies that evaluate economies. Denmark has a really strong economy. Therefore the national bank has money it can lend to the state. But Denmark hasnt always had a strong economy. Back with the financial crisis we found out how important it is to have a strong national bank That led to the Danish governments, since 2009, paying off national debt instead of spending that extra money on welfare. Therefore we were prepared this time Our economy is also intertwined with the rest of EU. Therefore we need to help eachother In the EU we have whats called the ‘Pandemic Emergency Purchase Programme’. They have 750 billion kr they can use to buy national bonds if a country needs it Italy, which was hit hard by Corona, had really needed this.

Italy’s economy started to crumble and financial support packages was needed 07:45 - Therefore the Italian national bank started selling bonds to fund these. But as more and more bonds were sold, the risk and therefore the interest started to rise. To combat this, the Pandemic Emergency Purchase Programme started buying up Italian bonds to keep the interest low. Okay. So… where does Mette Frederiksen get all the money for financial support packages? Mette Frederiksen and the danish state borrows money from the National bank. The national bank has some money because we have paíd off debt instead of spending The rest of the money the national bank gets from selling bonds to pension funds and private investors.

And if they really need it, EU can help buy up some bonds 08:47 - The Danish economy is so strong that multiple experts recommend giving even bigger support packages Yees…! That was a big video! Thankyou to all the new subscribers! Its really nice to see If you have ideas for new videos leave it in the comments below, you can also subscribe here! Otherwise I just want to say that, bonds and financial support packages are…. Sindssygt spændende! (Insanely exciting) .