Sunday, Oct 18, 2009
Can the nation handle the necessary belt-tightening?
The Times: Government debt ‘nearly three times higher than official figure’
The true level of Government debt is equivalent to 157 per cent of national output and nearly three times as large as the £805 billion figure reported by the Office for National Statistics, according to a new book published by a centre-right think tank.
Mr Newmark argues that the UK’s public sector net debt is equivalent to £85,610 per household...
Posted by devo @ 10:39 PM (1109 views) Add Comment
14 Comments
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1. paul said...
Careful - "centre-right think tank" means Tory-sponsored.
2. devo said...
Those figures, if correct, won't help any party.
3. paul said...
Absolutely, that's agreed devo.
Q. What's the difference between liquidity and solvency (or cashflow and bankruptcy)?
A. Depends how much influential your creditor is.
4. enuii said...
The truth is out there - somewhere!
5. crunchy said...
So let me see now.
The average house price is what? As Rolf would say - Can you see what it is yet?
6. cyril said...
I get really fed up with this sort of drivel. Everything in the public sector is financed in the same way as pensions and is therefore 'unfunded' (except of course by future tax revenue). So why not include everything in your calculation and have done with it?
7. drewster said...
cyril,
I agree with your point. However this "true" figure is important to answer critics who trot such nonsense as "the deficit was higher after the Napoleonic wars" (that was the argument in the Independent a few days ago). In the past we didn't have PFI, public-sector pensions, state pension, etc.
Fundamentally the principle seems flawed. Even if we can rack up more debt, it doesn't mean we should!
8. Watp said...
Does anyone else get that sinking feeling. I have been involved in 2 bankruptcies in my life and it all seems so familiar.
9. Watp said...
The only way out that the Government has is to print money, lots of it, and inflate away the liabilities.
10. fallingbuzzard said...
As a historian I'd point out that after 13 years of Napoleonic Wars, the UK had become as the hyperpower, being economically, militarily and technologically dominant within the world. Even with that, it was a struggle to reduce the deficit and Lord Liverpool, the then PM, didnt exactly have an easy time through 10 years of recessions, riots, radicalism and massacres. oh and 2 years of arrest without trial that made people disappear. Can't wait.
11. devo said...
Meanwhile in the USA an even more gloomy picture emerges:
* An officially recognized national debt of $11.8 trillion, which will likely exceed $12 trillion sometime this month.
* Unfunded national obligations of $104 trillion!
* Another $9 trillion in cumulative deficits over the next ten years.
* Plus another trillion dollars for health care reform, no matter what bill finally makes it through Congress.
Grand total: $125.8 TRILLION of public debts!
All told, that means that each and every household in America is now indirectly responsible for more than 1 MILLION DOLLARS in government debts and obligations. And that assumes no new government spending, no new social programs, no new wars, no new economic disasters or bailouts. Worse, it assumes no new deficits in the meantime!
Put another way, even if the government could somehow pay off that debt at the rate of $100 million PER DAY, it would take 3,446 years before the total government debts and obligations are paid off.
Even if Washington were to pay off $1 billion per day, it would still take nearly 345 years to pay off those debts!
Patently unsustainable debts? Yes! Patently unpayable? You bet it is!
Of course, Washington will never default outright on its obligations. But it doesn't have to. By devaluing the dollar, Washington can effectively pay off its debts with a cheaper currency.
Source: Larry Edelson
Money and Markets
18th October 2009
12. nopensionnohouse said...
Larry Who?
13. James said...
I would rather go to prison than pay £85,000.00 in tax for somebody elses toxic housing debt.
Whilst the government ensure that those people who borrowed lied on their mortgage applications, can stay in their massively overpriced houses.
I truly hate the Labour party.
14. uncle tom said...
As you can present the numbers in different ways, it is not easy to make a quick assessment, other than by going through the numbers line by line.
Some of the US doomsters seem to be taking mundane, everyday, tax funded expenditure, and totalling it up for years ahead. This gives a humungous figure, but tells you very little.
The real numbers to be concerned about are the future obligations that government has to meet, that are not covered by the current level of taxation.
In the UK, the most alarming of these are the public sector pension promises. The difference between what is currently paid in state sector pensions and what is likely to be paid in a few years time is of very serious concern, especially when one considers that one major source of tax revenue - North Sea Oil and and Gas - will have dried up by then.
The only sensible solution is to require the public sector to retire later. Unfortunately, I don't see the Dave and George show as the right team to deliver the bad news - without a very bad reaction...