We have a national debt of about £1.5T

[vegster]

Ok, France as well. Actually i wouldnt mind us taking over Poland also. slavs are the prettiest girls going. We will be spreading ourselves thin but there are three of us and we've only being going a few hours

Take a trip to Bognor for the day, the odd one maybe but most are awful.

 

[Hampster Gull]

Take a trip to Bognor for the day, the odd one maybe but most are awful.

Fair point, i havent been to Bognor

 

[Dorset Seagull]

its God its got to be God

Not quite the answer I was looking for but to give you credit it is topical

 

[drew]

Labour win backed by SNP
intrest rates 8% to 12% reposition of hundreds of houses business crashing apart from loan sharks unemployment over 4 million it would mean immigration would go down,health service collapse is this what you want. lets sort out this country so our youngsters won't be paying for our mistakes.

Are you seriously suggesting moving a lot of buildings around the country. What a waste of time and effort. Surely just makes sense for the current system where people move and not the buildings.

 

[Barrel of Fun]

How much is planet earth worth? With all the riches and all the deficits? What would be left to divide out equally?

 

[beorhthelm]

Can someone with a real understanding of economics give a simplistic breakdown of how this all works if that is at all possible. Who do we all owe the money to and where did they get the money from to lend to everyone in the first place?

the government mostly owes the money to us. our pensions and investment funds and insurance companies hold most, then similar institutions abroad. they need safe, secure place to put money that beats inflation to payout their liabilities. banks buy a large number too as they a counted as a cash holding while providing interest, so are good for shoring up the balance sheet. and of course, since quantative easing, the Bank of England has become a large holder as they've brought them up from the others. (interesting question/problem for european QE is who exactly will the ECB buy from as most european instituions are required to hold large proportion of their assets in euro bonds.)

 

[Hampster Gull]

Can someone with a real understanding of economics give a simplistic breakdown of how this all works if that is at all possible. Who do we all owe the money to and where did they get the money from to lend to everyone in the first place?

Crikey. This is a huge area but some basics below.

Money is the most efficient method we have found for exchanging goods and services. Money, or currencies, can be created by anyone but in practice governments have had a monopoly because people have tended to trust governments more than private businesses or individuals.

Historically governments created money through the printing presses. Currencies used to be backed by something, eg gold. So for every £100 created the Bank of England held a small quantity of gold. This created confidence on the value of the currency. This was ceased last century and now we have what is called a Fiat currency, i.e. there is nothing held physically to support it. However the trust in money has continued despite some concerns.

Governments also create money through electronic means. E.g. they can buy IOU's from private banks or even buy assets off banks. They can do this by electronically transferring a credit balance to the banks, no need for printing. Banks can then use this to lend to consumers of businesses, again electronically or physically, or keep some on their books. The UK, Japan, America and the EU have all done variants on this to this to try and stimulate their economies, ie to try and get people spending and investing again.

Governments need money to fund public spending on things like the NHS. However the more a government prints / creates money ( when the economy is not becoming more productive in what it produces) the more likely the value of the currency will weaken, ie less people want to hold a currency when they think it will be worth less tomorrow than it is today relative to other things. So there is a limit. Of course governments can raise money from issuing IOUs and these are considered very safe (few western governments refuse to repay although many emerging economies do). The safer the economy the less it costs to borrow money. Germany can borrow money more or less free, Russia pays c12% for 10 year IOUs.

Banks can also create money. They borrow money by paying an interest rate for savings from the likes of you and me and then lend out to others at a higher interest rate. But they lend out more than they hold. This is a regulated tightly by the government and varies by country and by institution etc but essentially they are creating more money. Banks also lend to each other and therefore become very dependent on the other banks remaining solvent. This all works as long as all their customers (individuals, business, banks) don't demand their money back at the same time, ie a bank run. Governments tend to step in when this looks like happening as the whole financial system could come to a halt if this happened (hence their involvement in 2007 / 2008).

So it is like a pack of cards which so far has held together. Some economists questions whether the growth debt can continue without major economic and social consequences but as ever in economics there is more than one view. If there were 5 economists you would probably have 7 theories. There is lots more to this of course.

 

[dingodan]

"Spend" logic vs "Cut" logic.

If you think the big spenders care about people, and those who want to cut do not, you should give this a listen.



Or if you would prefer the musical version

 

[e77]

Problem is in this country is will fall between the small state low tax regime in the US and large state high tax regime in Scandinavia and tend to want the best of both worlds (i.e. great public services with low tax).

At the moment a lot of people have been unaffected by cuts but if it continues it will hit something you need and I don't see a way that sacred cows such as pensioners benefits, NHS and defence can remain at current levels.

 

[nicko31]

Would anyone on this board loan money to politicans at 2% for 15 years? As long as there is someone prepared to do it we're be OK, but when that someone is no longer we're in trouble.

 

[Hampster Gull]

Would anyone on this board loan money to politicans at 2% for 15 years? As long as there is someone prepared to do it we're be OK, but when that someone is no longer we're in trouble.

At the extreme if no one will lend to us we "print" money and drive down the value of the currency, in effect make ourselves poorer and our debts cheaper.

 

[RexCathedra]

US National debt as a percentage of GOP was at its lowest since the Great Depression years during Nixon's truncated second term, plus Ford's and Carter's single terms.

You may recall what a powerful growth spurt the US experienced then, because of the low debt.
Low debt = great growth.
It's axiomatic.

 

[jeremy fisher]

I never understand why countries can't just refuse to pay or just tell banks they will pay later.
I mean a country vs a bank!? Lets see the bank come and get its cash...

Only 3% of government debt is borrowed directly from banks. The majority, over 40% of government debt is mostly owed to it's people (and companies). They borrow through the banks but the banks are mostly just spending our money as it's money we have saved with them in the form of pensions or savings.

If the government don't pay its debts or just write them off then it's mostly the people who have pensions or savings that don't get paid interest or simply lose their pension or savings.

The other problem is that currently we can't survive without borrowing more (you saw from the graph posted in this forum that we are borrowing more and more at the moment), so if we don't pay our interest then no-one will lend to us and we won't be able to afford our public services. It won't be 'cuts' it will be 'annihilation' or alternatively huge tax rises.

 

[cheshunt seagull]

Nationalise the banks then. There, that's sorted. Now I recon if we up it to a conservative £2.1 Trilion, that gives us 600 billion extra, split 60 million ways thats £10000 each.
Everyone's a winner.

I think the way it works is to nationalise bank losses and privatise bank profits. Then the same financial sector whose greed and incompetence has led to those losses charges us interest on the resulting debt.

 

[jeremy fisher]

How about going into administration and reforming as UK (2015) ? National debt would be virtually wiped out.

1. You'd be wiping out a huge portion of the people's pension funds and savings as that is a lot of what makes up 40% of national debt. Most of what the government borrow they borrow from the people.

2. No-one would lend to the government in the future as no-one would trust them. Governments can't survive without borrowings - most of our schools, hospitals, roads etc are purchased on borrowed funds. It would mean that in future the only things that could be spent would be what is raised in tax - taxes would have to rise as a result in the short term to pay for investment. Bad for everyone!

3. Overseas investment in the UK would fall. No-one would invest in a country where the government can't be trusted. That means fewer businesses entering the UK, less building and other investment and fewer jobs for everyone.

4. The UK financial sector would be decimated due to a lack of faith in the UK financial sector which is a very important part of the UK economy and one of the few industries in which we are a world leader. The UK economy would decline. There would be significant job losses bothi in that sector and sectors which rely on that e.g. shops based in the city.

In short - the country would be decimated.

 

[vegster]

In short - the country would be decimated.

I would strongly advise you looking up the term " Decimated " before using it again in a debate.

 

[El Sid]

If we aren't bothered about a £1.5T debt, would we care if it was £3T? why don't we just make it £6T? We could have a big splash on everything we like, NHS can have £500B, we could give benefits to everyone, maybe even just give everyone £1M, that would be a massive stimulus to the economy.

We seem to fret about our debt but it keeps rising anyway, so why fret? Doesn't seem to have any consequence.

We might as well just spend and enjoy it, right?

Who's with me?

Bernie Ecclestone's death duties should cover the bill. Just need to be patient.

 

[RexCathedra]

I would strongly advise you looking up the term " Decimated " before using it again in a debate.

'Reduced by a tenth', for GDP after a default on sovereign debt, would be a pretty good outcome.

 

[Kevlar]

or on the other side of the account sheet
the total savings in sterling in the private sector of 1.5 T
how does the nation reduce to the government sector?
particularly ironic as those that bang on about this are the last to think that
the historical reality is the uk have run government sector deficits
9 years in ten for over 400 years!
get over it guys it's called sovereign monetary power
government spends and creates numbers in the accounts of households and firms
governments tax and destroys numbers from the accounts if households and firms
a government sector deficit= a private sector surplus
government sector debt = private sector savings
the more the merrier
until inflation is too high
and in the current globalised economy with countries competing to lower
the value of their currency for export advantage
and collective labour bargaining power at an all time low
excess productive capacity
we would have to have some extraordinary levels of deficits to raise inflation to
more normal historic levels as Japan have found out

 

[Kevlar]

US National debt as a percentage of GOP was at its lowest since the Great Depression years during Nixon's truncated second term, plus Ford's and Carter's single terms.

You may recall what a powerful growth spurt the US experienced then, because of the low debt.
Low debt = great growth.
It's axiomatic.

And the recession arrived in 1973
just like ALL the other US recessions of the last 50 years
immediately following falling government sector deficits