Budget 2016

[Kaz]

My conclusion is that the 'debt' is not actually in 'real' money so is nothing to worry about.

Exactly, so why is this government so keen on paying it back even to the severe detriment of its own people?

[Suff]

My conclusion is that the 'debt' is not actually in 'real' money so is nothing to worry about.

Exactly, so why is this government so keen on paying it back even to the severe detriment of its own people?

They're not. They can't. The debt we currently have is £1.2tn. Our GDP is £1.4tn and our tax receipts on that GDP is around £350bn.

We run a budget deficit of around £75bn (down from £160bn when Brown went), which keeps driving that debt higher and higher.

They won't be paying any debt back until the deficit is turned into a surplus.... £20-£30bn of the money we borrow goes to paying interest on debt. When we get the deficit down to about £20bn, we will finally be at the point where we are only borrowing what we owe in interest.

Of course as soon as Labour come back in they will try to spend like crazy and the whole ball game will start all over again, just from an even more difficult position. Just ask Hollande who is now completely blocked at 97% of GDP in debt. He can't borrow because the cost of that borrowing is too high. The French hate him for it and they are right. He was part of Mitterands government which made the very same promises and hit the very same ceiling. Just goes to prove that politicians do make the same mistakes over and over again.

[Aggers]

Thanks, Suff, for answering my question regarding the government borrowing of money.

I shall. though, have to thing about it quite lot before I can really understand it.

[Workingman]

There are ever so many financial strategies for running an economy, as Osborne knows, and he has just used some of them to balance his budget books. There are bonds, quantitative easing, inflating away debt. negative inflation (?) growing GDP... the list is almost endless.

Current global debt is about $60 trillion. The USA 'owns' 29% of it, Europe 26% and Japan 20%. The UK 'owns' about 4%. Will it ever be paid off? No. Will anybody ever try? Why should they - it is not real money.

Big players are allowed to accumulate this 'debt' because not to allow them would be disastrous for the 'global economy'. Imagine what things would be like if the USA was 'forced' to pay off its 'debts' in the same way as Greece is having to do.

[Suff]

Very true it's not real money. But in order to retain the chimera that this "funny money" is worth something then there have to be limits. If you exceed those limits your cost of borrowing goes up. Essentially you have devalued your currency and you have to pay more of that devalued currency in order for those who bought it to keep on buying it.

Whilst it is possible to fiscally waterboard a country like Greece, trying to do the same to the US would destroy both the Japanese and Chinese economies. Hardly the best result in the world.

The huge economies can borrow so they can consume the goods of the smaller economies. This, we are told, is good sense and works. Smaller economies, on the other hand, can't be allowed to carry on in excess of the larger one's or they will break the whole system.

For instance the US is about 105% of GDP in debt at present. Greece, on the other hand, defaulted on 75% of it's debt and wound up 150% of GDP in debt. A somewhat different equation. The only reason that Greece was not allowed to fully default, like Iceland, is that it would have broken the Euro and the Euro countries could not allow that as it would have punished them. Never mind the fact that Greece borrowed the money to buy goods from the Euro countries, that small fact is swept under the carpet and the focus is on pensions and retirement, not on German and French cars and German appliances and French financial vehicles.... No, let's tell the world about those horrible Greeks.

If you read the right articles you find that Greece is already more in compliance on pensions, retirement ages and welfare than either France or Germany. Why are they so crippled? Because of the debt repayments they have to make, not because their people are living the life of Reilly....

The best viable course for the UK is to get out of deficit then leave the debt to devalue as the economy grows and inflation destroys it. On the other hand the second we are out of deficit and the economy is growing strongly, the £ will increase in value, devaluing our goods and slowing our economy again.

Great merry go round isn't it....

[Workingman]

The best viable course for the UK is to get out of deficit then leave the debt to devalue as the economy grows and inflation destroys it.

So we are not paying it off, we are using fiscal mechanisms to get rid of it. This trick only works because the debt is nominal, it is not real money. If it was hard cash, as most of us know it, the debt could never, ever, be paid off. However, because it is only a number debt the brains in the economic world can, and will, come up with schemes to reduce it, inflate it, or write it off.

It is not a great merry go round, it is a con. Probably one of the best ever.

[victor]

and a point that confuses me is

when read of banks etc being fined"millions" ,where is that going ?

has what ever they are fined for affected their customers? if so should'nt the fine be shared by them?

[Kaz]

It is not a great merry go round, it is a con. Probably one of the best ever.

Exactly!

[Suff]

It is not a great merry go round, it is a con. Probably one of the best ever.

Nope that one is owned by Fiat Currencies and nothing is ever going to top that con....

I promise to pay the bearer the sum of £1. Yep, exactly, submit one note or coin and have it replaced with another note or coin of the same value.......