These are the G7, seven of the biggest

rich economies, and one of them is first

in line to go bankrupt. Now, on paper,

the case against some of them looks

obvious. Japan owes the most for its

size. America borrows the fastest.

Britain pays the highest rate of all,

but the most obvious suspect is Japan

with its enormous debt. Japan's

government debt is sitting at a cool

204% of its entire economy, the heaviest

load in the rich world. So naturally,

you would expect Japan to pay the

highest interest rate of the seven. But

here's the strange part. It pays the

lowest, about 3%. So how is that

possible? Well, it comes down to who

Japan actually owes the money to. When a

government needs money, it borrows by

selling bonds. A bond is basically an

IOU. Only about 8% of Japan's government

bonds are held by foreigners. The rest

sits inside Japan with Japanese banks,

insurers, and pension funds. And the

biggest holder of all, with almost half,

is the Bank of Japan. That's the

government's own central bank, the

institution that creates the yen. That's

what saves Japan. Every government on

this list pays off its old loans by

taking out new ones. So for a country

going bankrupt is the moment the lenders

walk away like they did with Greece in

2015. But Japan's biggest lender creates

the yen. It can always buy more and no

outside lender can cut Japan off. That's

the first of three rules I'm going to

clear these seven countries with. The

rule is who do you owe? Japan mostly

owes itself. So Japan is cleared. One

down. There is still a bill though and

it shows up in the currency. In July

2026, the yen hit its weakest level

against the dollar since 1986. So,

everyone who saves in yen pays that bill

a little every year. That's the price

Japan pays for being cleared. But

remember one thing about Japan. Japanese

investors hold a lot of bonds from one

of the other six countries. And in 2024,

they sold more of that country's

government debt than they bought. I'll

tell you which country when we get to

it. For now, we have America. And this

is what America paid in interest on its

debt in the budget year that just ended.

$1.14

trillion. That's more than it spent on

Medicare or its entire military. Put

another way, $1 in every five the

government collects goes straight back

out as interest. That sounds like a

country in serious trouble, but

actually, America is clear, too. This

time it's because of rule two. Which

currency do you owe? America owes

dollars and America's central bank

creates dollars. The Federal Reserve

Bank of St. Louis once put it pretty

bluntly. As the sole manufacturer of

dollars, the US government can never

become insolvent. Insolvent just means

unable to pay its bills. Now, compare

that to Greece. Greece owed euros and

Greece had no way to create euros. So

when the rescue money stopped in 2015,

the banks ran short of cash within days.

So a country that owes its own currency

can always find the money as long as its

central bank is willing to create it.

The price for this is that the currency

of course loses value the way that yen

has. But there is one catch [music]

here. That rule only works as long as

America is allowed to keep borrowing. So

the only way America runs out of dollars

is if it chooses to. See, America has a

legal cap on its own debt. I live in

Denmark, and we actually have one, too.

But ours is set at more than three times

what we owe currently, so nobody ever

thinks about it. America's cap is a lot

tighter. It's that past $40 trillion in

August 2026, and the cap is 41.1

trillion. So, in October 2026, there was

about 1 trillion of room left under it,

and America borrows $2 trillion a year.

So that means it hits the cap in about

2027. Now the Treasurer can shuffle

money around for 6 to 9 months after

that. But if Congress still refuses to

lift it, the one country that can always

pay stops paying, which is wild.

Remember that year, though, 2027,

because it ends up mattering a lot by

the end of this video. There's also one

more thing you should know about

America. Whenever the world panics,

money usually runs into American

government bonds because they're seen as

the safest place to hide. That's what

happened in the last Euro crisis. This

time the money went somewhere else. And

I'll show you where at the end. Next up

is Germany. And by the two rules so far,

Germany should actually be quite

nervous. Half of its debt is held

abroad, so it fails rule one. And it

borrows in euros, which it has no power

to create, so it fails rule two as well.

But I'm still going to clear it. And

here's why. This is Germany's stat.

About 65% of its economy. Every other

country in this lineup is above 100. And

that low number is what saves Germany.

The rules only start to matter once

lenders begin to doubt you. And Germany

gives them nothing to doubt. It holds

the top credit rating there is. And in

the first days of October 2026, as money

left French bonds, it went straight into

German ones. Now, Germany is spending

[music] that advantage. In March 2025,

it rewrote its constitutional debt limit

in a single week. And this year its

budget gap is on course to be bigger

than Italy's. But it still has more room

than anyone else here. So Germany is

cleared. Then there's Canada. And

Canada's debt is a strange one because

it has two official numbers. Canada's

government debt is 111% of its economy.

Canada's government debt is also 10% of

its economy. Both are official figures

from the International Monetary Fund. So

how can both be true? Well, the first

one counts the debts of every level of

government in Canada. The second one

subtracts the financial assets those

governments own, and they own a lot,

including the giant portfolios of the

public pension [music] funds. If you

count it that way, Canada has the lowest

government debt of the seven. Its

federal government also borrows in its

own dollars, so it passes rule two as

well. That makes Canada's books the

cleanest of the seven. So, Canada is

clear, too. And Canada actually hands us

the next clue because its prime minister

is Mark Cornet who used to run the Bank

of England back in 2016. He said Britain

was relying on quote the kindness of

strangers. He was talking about the

foreign investors Britain depends on for

money. 6 years later the strangers

stopped being kind. This is the interest

rate on British government debt in

September 2022. Watch what it does in

just three trading days. On Friday the

23rd, a brand new government announces

tax cuts worth4 billion a year with no

plan to pay for them. The day before on

Thursday, Britain paid 3.6% on a 10-year

loan. By Tuesday, it's 4.5%. The pound

briefly touches $1.03,

the lowest it has ever traded, and then

it gets worse. British pension funds had

borrowed money using their government

bonds as security. The problem is when

the rate on a bond jumps, the bond

itself is worth less. So the funds have

to sell bonds to raise cash. That pushes

prices down again, which forces even

more selling. On day five, the Bank of

England steps in and offers to buy up to

65 billion pounds of bonds. It ends up

needing 19. Now watch how fast Britain

reverses. Day 10, the government drops

its most controversial tax cut. Day 21,

the finance minister is fired. Day 24,

his replacement scraps almost everything

that's left. By now, 32 of the 45

billion is gone. Day 27, the prime

minister resigns. By the way, a British

tabloid had pointed a webcam at a

Lettuce to see which would last longer,

the letters or the prime minister.

Spoiler alert, the letters won. But

anyways, that's rule three. Lenders can

lose trust in you in a matter of days.

So the question is, can your government

change course just as fast to win them

back? Britain did it in under a month.

Its own central bank bought the time,

which Israel to again. And its political

system removed the people responsible.

Today, Britain pays 5.4% on 10-year

debt. That's the highest of all seven,

and it's higher than the worst day of

2022. But back then, a jump like that

took three trading days. This time it

took seven months and nothing stopped.

Britain's new government has also put in

writing that it will keep to its

borrowing rules. So yes, Britain is

expensive, but Britain is cleared. Five

down. So now it comes down to Italy and

France. And if you just look at the raw

numbers here, they do point at Italy.

Italy's debt is 138% of its economy.

France's is at 118. And Italy's credit

rating sits at least three steps lower.

[music] But we have three rules. So

let's score them. Rule one, who do you

owe? Well, Italy owes about a third of

its debt to foreigners. France owes more

than half. On top of that, Italian

households hold about an eighth of their

government's debt directly. In France,

households and ordinary businesses

together hold about 1%. And remember the

Japanese investors, the ones selling the

debt of one of the other countries in

2024. Yeah, that country is France. They

hold about $150 billion of French bonds,

government, and company bonds. In 2024,

they sold about $ 24 billion more of

France's government debt than they

bought. So, Italy passes rule one and

France fails it. Rule two, which

currency? Well, both of them owe euros,

and neither of them can create euros, so

they both failed rule two. And that's

dangerous because a country in the euro

has no money press of its own. When

lenders panic, the only one who can step

in is the European Central [music] Bank.

And Italy has already been through that.

Back in 2011, during the Euro crisis,

lenders started turning on Italy. And on

the 5th of August, this letter went in

secret from the European Central Bank to

Italy's prime minister. It listed what

his government had to do. Balance the

budget by 2013. Tighten pensions. Cut

public sector pay if necessary. Within

days, the central bank started buying

Italian bonds. Italy moved within weeks

and lenders still pushed its rate to 7

and a half% by November. See, the power

to create euros sat with the European

Central Bank. So, nobody else got to

decide what was enough. The prime

minister resigned and an unelected

economist replaced him within a week and

3 weeks later the pension cuts were

enforced by decree. Now, Italy made

every payment on its debt, but its

budget was written to satisfy a letter

from the central bank. And for a big

rich country, this is how bankruptcy

starts. Your lenders begin writing your

budget, which brings us to rule three.

How fast can you turn? [music] Let's

take Italy first. It's had one

government since October 2022, which is

the longest lasting in the history of

the republic. If you leave out interest,

Italy has collected more than it spent

in 26 of the last 31 years. France only

managed that in four of those 31 years

and it hasn't done it once since 2001.

Then on the 2nd of October 2026 as its

borrowing cost jumped, Italy's finance

minister cut the extra borrowing he

wanted for defense from €22 billion to

14. So lenders turned and Italy turned

with them in the same week. Now France,

if you count the interest, the last year

the French state took in more than it

spent was 1974. That's 51 deficits in a

row. Fixing that takes votes. So, let's

look at who has to find them. Five

people have held the prime minister's

job since the start of 2024. Parliament

voted two of them out. The parties in

government hold 162 of 577 seats, and

their last budget was forced through

without a vote three separate times.

Then lenders turned. In September 2026,

France admitted its deficit was growing

again to 5.4% 4% of its economy and said

it would borrow a record €340 billion in

2027. That's €1.3 billion every working

day. So, in the first days of October,

money left French bonds for German ones,

and France's 10-year rate touched almost

5%. And here's what makes it worse.

France pays an average of 1.9% on its

old debt. On new 10-year bonds, it pays

4.9. So as old come to you, France

replaces them at about double the price.

So then there's turned on France. Did

France turn back? Well, on the 9th of

October 2026, the group of French

politicians in charge of the budget took

the part that sets next year's taxes and

rewrote it. Their new version would have

wiped out the cut to the deficit that

the government had planned. And then

they voted against their own version.

Three in favor, 31 against. So Isley

passes rule three as well. and France

fails it. Vendors have already scored it

the same way. Italy and France borrow in

the same currency, so the gap between

them comes down to trust. Italy pays

4.6%, France pays 4.9%. [music]

Italy is cleared barely, which leaves us

with France. France is the only of the

seven that fails all three rules, which

makes it the rich country first in line

to go bankrupt. And that's bad news for

the other six as well, because France is

too big for the rescue system Europe

built. Look at this. This is everything

the Euro zones two rescue funds have

ever lent to five countries, €295

billion. France plans to borrow more

than that in 2027 alone. The main fund

can lend 500 billion at most, and

France's debt is 7 times that. And

France is meant to supply a fifth of

that fund's money itself, which means

only the European Central Bank is big

enough. Since 2022, it has had a tool

for buying the bonds of a country under

pressure. That tool comes with

conditions. It has never used it. So

what does first in line actually mean

here? It means France is next in line

for a letter like Italy's. If its

borrowing costs keep climbing, France

will end up needing the European Central

Bank to step in. And just like with

Italy, that help comes with a list of

demands. If France accepts them, other

people end up writing its budget. And if

you fight it, well, just look at Greece.

In June 2015, Greece's government put

his list to a referendum. 2 days later,

its banks were shut. And 2 days after

that, pensioners with no bank card were

queuing outside branches opened

especially for them to collect €120 for

the week. Greece signed in the end.

Today, before interest, it collects

almost 5% of his economy, more than it

spends, and instead measured against his

economy, fell by nine points in a single

year. That's a big part of why Greece

now borrows cheaper than France. Now, to

be fair, lenders are betting that France

keeps paying. The price of ensuring its

debt implies roughly a 1 in5 chance of

default over 5 years. And on the 1st of

October, near the worst of the sell-off,

France borrowed €12 billion and lenders

had offered 27. So they still show up.

They charge more each time. And France

won't go through this alone. Every one

of the other six is tied to France in

some way. And one of them could even get

there before France does. Italy gets hit

first. French banks are the biggest

foreign lenders into Italy with more

than 40% of the total. On the day French

bonds sell off, the extra interest Italy

pays over Germany jumped to its highest

in a year and a half. So if France goes,

Italy probably follows within days.

Germany gets the bill. It's the biggest

backer of the rescue fund and German

investors hold more than $400 billion of

French bonds. Japan was already selling

two years before any of this. You saw

the numbers. But honestly, Britain's

banks have the most to lose. They've

lent more into France than any other

country's bank. Canada's banks have lent

the least of the six, so they're safe

here. Once again, Canada has the

cleanest books. And then there's

America. I said I'd come back to two

things. Now is the time. The first is

where the money ran. In the last Euro

crisis, when Europe panicked, the

world's money ran into American

government bonds, and America's 10-year

rate fell from 4% to 1.4. In this panic,

the money ran to German bonds and to the

dollar. American bonds got one good day

and over the whole sell-off, America's

10-year rate actually went up to 5.3%,

its highest in 24 years. That makes

three scares in 2 years where American

debt failed as the place to hide. April

2025, the Iran war in March, and now

this, the second is that 2027 deadline.

France's crisis arrives whenever lenders

decide. America's has a year on it. It

hits the cap in 2027. So, here's the

curious way I could be wrong about the

order. If Congress still refuses to lift

the cap once the Treasury runs out of

room, the country I cleared second could

go first. So, France is first in line,

and the queue behind it is very short.

So, let's see what happens. But that's

it for this video. Thanks so much for

watching and I'll see you in the next