Thursday, May 07, 2009
What if the UK is a person?
BBC: Fred-sizing the economy
Interesting video, which concludes that for every extra £1bn debt the UK government borrows, it is equivalent to an addional £300 annual interest payment for an average person on modal income of £15,000. Sounds Expensive?
Posted by peter_2008 @ 02:33 PM (722 views) Add Comment
7 Comments
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1. paul said...
I would joke that if the economy's name is Fred then surely he could blow it all down the horses then sting the government for an early retirement package equivalent to his winnings and more to live the life of riley but anyway ...
It is interesting that the article writer has used the more plausible real average wage of £15k, not the ONS 'calculated' average salary of £23k.
2. Droctopus said...
Not quite, he said that £1billion is equivalent to a tenner in the world of the £15,000 pa average earner.
£1trillion would equal £300 per year of interest payments, although that figure is based on reasonable interest rates, a situation that could change.
3. peter_2008 said...
Modal income = the level of income that most of people receive. Average income = divided between rich and poor.
Here is an interesting link http://www.ifs.org.uk/wheredoyoufitin/
Here, the OVERWHELMING MAJORITY of real people outside of GB’s fantasy world have net income of about £200-£300 after tax. That is between £10K to £15K per year.
Do you hear me NuLab? Less than £15K!!
4. mountain goat said...
Taking on more debt is arguably ok as long as GDP benefits from it. The more debt you have the less "bang for buck" you get for each new £ borrowed because of interest costs. Eventually it gets to a point where new borrowing does not increase GDP at all. Borrowing even more beyond this point means the economy will shrink with every new £ borrowed. Who knows where we are in this range, but some believe the USA is in the final stage where more borrowing leads to a shrinking economy.
5. Test said...
It argues no such thing. Instead it says that for every billion in government debt, the annual interest payment per person is 20 pence!
The 300 pounds figure corresponds to the *entire* additional debt required throughout the recession...
6. On The Edge said...
Can we go though the first part again? the bit where we created the money out of thin air to bail out the bankrupt banking system. I get lost somewhere between there and the bit where we get to pay back the interest on the loan..... Normally if I borrow from a bank I get to pay back the loan plus interest; this time the bank borrows from me and I still get to pay back the loan plus interest......???
Pass the Vaseline
7. Righttoleach said...
'Modal' income is NOT an average. It is the income recieved by the biggest number of people. Split income into bands of say £1000.....e.g £14,500-£15,499, £15,500-£16,499.......the band with most people in it is the mode