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How To Stop Worrying And Love The Debt

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Hutton argues that increased government debt is the best way forward now.

I offer no comment, just one choice quote and a linky....

The result is that companies are repaying debt and not investing. As in Japan, low interest rates are having little traction.

The pound's huge devaluation and starting with low levels of public debt means that we are better placed than others.

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Japan never fixed it's debt bubble.

You cannot expand debt forever at some point you have to pay the money back or you go bust because you can no longer service the loan.

Unless of course there debt is wealth and servicing costs aren't really an issue because debt growth is outstripped by real growth in the economy.

So what we need is even more debt.

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Hutton argues that increased government debt is the best way forward now.

I offer no comment, just one choice quote and a linky....

The least he does ir "arguing". He is an astrologer pretending to be a trained physicist/astronomer. He is a charlatan pretending to be a doctor. He is a kamikaze. The only question is if he understands what he is talking (spinner of some VIs) or is he completely devoid of sound economic thinking & argumentation?

Edited by Meerkat

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Japan never fixed it's debt bubble.

You cannot expand debt forever at some point you have to pay the money back or you go bust because you can no longer service the loan.

Unless of course there debt is wealth and servicing costs aren't really an issue because debt growth is outstripped by real growth in the economy.

So what we need is even more debt.

IMHO Hutton's problem (and he's not alone) is that he can only support a solution that doesn't involve pain.

If someone fell out of a 1st floor window, he'd recommend digging a big hole really quickly so that they don't hit the ground.

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My understanding is that we should go with the cycles of life not fight against them. Trying to make perpetual summer will end in a long deep winter.

Paying down debt is the right thing to do.

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Paying down debt is the right thing to do.

Wash your mouth out and report to the nearest re-education centre immediately.

Your even using NuLabours patented it's "the right thing to do" mantra.

You are indeed an evil person. :P

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IMHO Hutton's problem (and he's not alone) is that he can only support a solution that doesn't involve pain.

If someone fell out of a 1st floor window, he'd recommend digging a big hole really quickly so that they don't hit the ground.

Nice one.

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IMHO Hutton's problem (and he's not alone) is that he can only support a solution that doesn't involve pain.

If someone fell out of a 1st floor window, he'd recommend digging a big hole really quickly so that they don't hit the ground.

That would work if Brown was digging.

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Paying down debt is the right thing to do.

If we pay down the debt with a fiat money system, then prices must fall, wages must fall, the burden of debt increases, so we get more bankruptcies and business failures, more unemployment etc etc.

QE is the only way that we can get around this without dumping the current system. (Not that I think it should be saved)

Short term limited QE which doesn't cause inflation to take off is right. Long term we need a stable amount of money in circulation, and to not have the cerntral bankers ignoring high monetary growth rates just because clothes and tellies are getting cheaper.

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If we pay down the debt with a fiat money system, then prices must fall, wages must fall, the burden of debt increases, so we get more bankruptcies and business failures, more unemployment etc etc.

Not really disagreeing, but isn't that rather the point?

"Dad, if I pay you back the money I borrowed, I'm not going to be able to buy many sweets."

"Correct, son."

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If we pay down the debt with a fiat money system, then prices must fall, wages must fall, the burden of debt increases, so we get more bankruptcies and business failures, more unemployment etc etc.

QE is the only way that we can get around this without dumping the current system. (Not that I think it should be saved)

Short term limited QE which doesn't cause inflation to take off is right. Long term we need a stable amount of money in circulation, and to not have the cerntral bankers ignoring high monetary growth rates just because clothes and tellies are getting cheaper.

In other words QE buys the country time to pay off the debt with future earnings with less pain. You still should pay off the debt while using QE and not ignore the problem, just spread the burden over a manageable period.

That nutter Brown seems to want to ignore the problem and keep spending as before while effectively borrowing into our future. It's the same as getting more plastic to avoid paying down your card debts, but on a trillion pound scale.

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What we can't get to the bottom of is whether UK debt is really smaller or bigger than other nations. The establishment is under the impression that our debt is relatively smaller than Germany, Japan et al. But what is the real truth, and no this is not an excuse to bring up public sector pensions.

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If we pay down the debt with a fiat money system, then prices must fall, wages must fall, the burden of debt increases, so we get more bankruptcies and business failures, more unemployment etc etc.

QE is the only way that we can get around this without dumping the current system. (Not that I think it should be saved)

Short term limited QE which doesn't cause inflation to take off is right. Long term we need a stable amount of money in circulation, and to not have the cerntral bankers ignoring high monetary growth rates just because clothes and tellies are getting cheaper.

The only choice is between a fast crash and a slow one.

We've got to the stage now where QE is just replacing lost tax revenue, an average of 1bn a day is needed just to maintain the current situation, if QE stops we go Caulifornian instantly. 'Short term limited QE'? That's already been done! To stop now would mean having to go the IMF, to continue will mean having to go the IMF a bit later.

More QE will surely lead to a flight from the Gbp and to inflation of imported goods but deflation of many UK assets and products.

On a personal level, would you take on debt a this time?

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Not really disagreeing, but isn't that rather the point?

"Dad, if I pay you back the money I borrowed, I'm not going to be able to buy many sweets."

"Correct, son."

But its not quite like that. It's the boy next door paying back the money he borrowed, and now no kid in the street can afford sweets because there's no money to pay for them.

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I think the thing is that there is a certain group of people, which largely consists of landlords and those in the upper echelons of the public sector, that are psychologically so bound to the neoliberalism + big state model (because their livelihoods, reputation and status are so dependant on it continuing) that they will grasp at any solution, no matter how improbable to the rest of us, to keep the wheels on the wagon.

The most prominent of these people are Will Hutton, Paul Krugman and Gordon Brown. As Mish pointed out, you can't argue with Keynesians because whenever their stimuli don't work, their excuse is always that it wasn't early/big/protracted enough. These people are essentially nothing more than wishful thinkers.

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In other words QE buys the country time to pay off the debt with future earnings with less pain. You still should pay off the debt while using QE and not ignore the problem, just spread the burden over a manageable period.

That nutter Brown seems to want to ignore the problem and keep spending as before while effectively borrowing into our future. It's the same as getting more plastic to avoid paying down your card debts, but on a trillion pound scale.

That's what we are doing. It's mostly foreign bondholders redeeming their Gilts at the BoE. As a nation, we appear to be more in debt, but we actually owe more money to the BoE... ourselves basically.

There are definite plans afoot to reducing the public sector by all major parties, if you can believe the news.

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In other words QE buys the country time to pay off the debt with future earnings with less pain. You still should pay off the debt while using QE and not ignore the problem, just spread the burden over a manageable period.

So we are both Ocean Finance and the retarded debtors on that advert? :unsure:

Edited by pete.hpc

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IMHO Hutton's problem (and he's not alone) is that he can only support a solution that doesn't involve pain.

If someone fell out of a 1st floor window, he'd recommend digging a big hole really quickly so that they don't hit the ground.

+1

Brilliant comment, I might put that onto my sig, thanks.

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That's what we are doing. It's mostly foreign bondholders redeeming their Gilts at the BoE. As a nation, we appear to be more in debt, but we actually owe more money to the BoE... ourselves basically.

This appears to be a very euphemistic way of saying that HMG is surviving on freshly-printed money.

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Guest UK Debt Slave
I think the thing is that there is a certain group of people, which largely consists of landlords and those in the upper echelons of the public sector, that are psychologically so bound to the neoliberalism + big state model (because their livelihoods, reputation and status are so dependant on it continuing) that they will grasp at any solution, no matter how improbable to the rest of us, to keep the wheels on the wagon.

The most prominent of these people are Will Hutton, Paul Krugman and Gordon Brown. As Mish pointed out, you can't argue with Keynesians because whenever their stimuli don't work, their excuse is always that it wasn't early/big/protracted enough. These people are essentially nothing more than wishful thinkers.

Nicely summarised

Though I wouldn't point the finger specifically at landlords. It's a national, even global, state of mind that says the only path forward is to continue down the same economic cul-de-sac until you hit the brick wall that is lurking somewhere down the way. The absolute unwillingness to deal with the roots of the problem will just make the eventual crash into the wall at the end of the tunnel even more catastrophic..........but they'll just press the pedal to the metal none the less. It's easier to fudge a solution and continue the insane commerce game we are all unwittingly engaged in........for the time being anyway. ;)

Collective insanity. Donchya just love humanity?

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The only choice is between a fast crash and a slow one.

We've got to the stage now where QE is just replacing lost tax revenue, an average of 1bn a day is needed just to maintain the current situation, if QE stops we go Caulifornian instantly. 'Short term limited QE'? That's already been done! To stop now would mean having to go the IMF, to continue will mean having to go the IMF a bit later.

More QE will surely lead to a flight from the Gbp and to inflation of imported goods but deflation of many UK assets and products.

On a personal level, would you take on debt a this time?

We have had a fast crash. Have you noticed the GDP figures?

The pound hit bottom before QE was even mentioned (I think) and rose throughout. Unless you think that it's going to fall again. I must admit that this does confuse me somewhat, you would expect if to fall.

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This appears to be a very euphemistic way of saying that HMG is surviving on freshly-printed money.

Nothing euphemistic about it. It's completely open.... The BoE buying gilts = printing money. I don't think anyone is disputing that.

The only questions are how much and for how long.

Edited by dazednconfused

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