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Consumers Pay Off £600m Of Debts As They Batten Down Hatches

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http://www.telegraph.co.uk/finance/persona...wn-hatches.html

The Bank of England data indicated that consumers paid back £635 million more than they borrowed during July – the first time this has happened since 1993, when records began.

The fall in the total level of consumer debt, dipping to £1.46 trillion, means thousands of prudent households have started to trim their credit card bills, pay back their mortgages and reduce their unsecured loans.

Debt experts welcomed the development saying it was about time consumers stepped "off the debt spiral" and got their finances in order.

However, economists warned that the it was bad for the Treasury and businesses if consumers stopped spending and borrowing.

Louise Brittain, debt partner at accountants Baker Tilly, said: "Thank goodness. This is really good news that the British public is finally doing the sensible thing and not endlessly borrowing and is now stepping off the debt spiral. People have done nothing but spend now and pay later for the last decade or so, and they have realised this just can't go on for ever."

The biggest fall came from mortgages, with home owners paying back £418 million more during July than they borrowed.

Part of the move into negative territory – again the first time this has ever happened – has been driven by banks and building societies cracking down on their lending and only offering mortgages to people with good credit histories.

If I've got the right number of zero's and the maths correct that means:

635000000/1460000000000*100=0.043% paid back of what we owe.

The foundations to build a recovery on.

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Cheers, I thought it was a tiny %ge but hadn't woked it out.

It's not clear how they deal with bad debt provisons / write-offs. Maybe all that's happened is that lending is now been overtaken by write-offs.

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Guest sillybear2

It makes no real difference, for every £1m repaid the government is borrowing £5m on our behalf.

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Guest Parry aka GOD
Every little helps.

That's about 3 days of interest on the 1.46 trillion.

Tells me you have to crash the Pound.

I mean really crash it.

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1,460,,000000,000

There's a thousand billion in a monetary trillion isn't there?

Which makes the figure quoted 1460 trillion

Humm..

Edit sorry..my mistake...I can't count

Edited by Stars

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Trouble is, the more that bank debt is repaid, the smaller the money supply remaining in circulation, all else being equal.

Money becomes ever scarcer and harder to acquire to pay down further debt.

Is QE overwhelming this net debt repayment by Joe Public and ensuring that M4 is still increasing exponentially?

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That level of debt was a price worth paying, as everyone now has a very small building in which to collect tons of cheap sh1te in. Hardwood flooring, BMW's, botox injections and wet rooms. Ain't life grand. :blink:

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Trouble is, the more that bank debt is repaid, the smaller the money supply remaining in circulation, all else being equal.

Money becomes ever scarcer and harder to acquire to pay down further debt.

Is QE overwhelming this net debt repayment by Joe Public and ensuring that M4 is still increasing exponentially?

I dont think thats true

you and I cant borrow from the BoE. the banks do. the amount of credit is reduced if we dont borrow, and if we take cash out, then thats less they have to play with too.

Edited by Bloo Loo

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Guest sillybear2
Trouble is, the more that bank debt is repaid, the smaller the money supply remaining in circulation, all else being equal.

Money becomes ever scarcer and harder to acquire to pay down further debt.

Unless government does its timeless act of borrowing and pissing it away.

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Unless government does its timeless act of borrowing and pissing it away.

The government generally borrows from the existing money supply.

Gilt sales usually just shift money from the Gilt buyers' bank accounts to the Treasury.

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I dont think thats true

you and I cant borrow from the BoE. the banks do. the amount of credit reduced is we dont borrow, and if we take cash out, then thats less they have to play with too.

Not following you here, BL.

What bit don't you think is true?

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Not following you here, BL.

What bit don't you think is true?

bank credit doesnt circulate...BoE money does, both as cash and current accounts the banks have at the CB.

paying back bank credit doesnt reduce the BoE money...it does reduce the profits the banks make from interest.

so yes, M4 is reduced, but the money they are worried about, M1, remains...QE is adding to it of course, maybe to counteract the M4 reduction...who knows why they are really doing it?

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bank credit doesnt circulate...BoE money does, both as cash and current accounts the banks have at the CB.

paying back bank credit doesnt reduce the BoE money...it does reduce the profits the banks make from interest.

so yes, M4 is reduced, but the money they are worried about, M1, remains...QE is adding to it of course, maybe to counteract the M4 reduction...who knows why they are really doing it?

Surely both circulate, though in separate but related spheres?

Bank credit is (almost all of) our means of exchange and circulates 24/7 between bank accounts.

BoE money circulates between banks' own BoE accounts. Its movements reconcile, daily on a net basis, the much larger circulation of the bank credit in the wider economy.

My post was about the reduction in M4 when bank debt is repaid, and we seem to agree that this happens. This is what makes (M4) money harder to acquire for further bank debt repayment - there's simply less of it about (all else equal).

As I understand QE, when a Gilt is purchased by the BoE from a non-bank (reportedly the bulk of the QE Gilt purchases) the seller's bank receives an equal amount of M0 in its BoE account to balance the M4 appearing in the seller's bank account.

Thus both M0 and M4-minus-M0 increase equally with QE, the latter in sufficient quantity to overwhelm the reduction due to debt repaymnet.

PS Is there a standard label for "M4-minus-M0"?

Edited by The Spaniard

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