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History Of Uk Debt To Gdp

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I have done a little investigating to see how 'unprecedented' is the debt crisis currently facing the UK

I came across the attached graph which I found rather surprising

uk-us-public-debt-since-1800.png

The figures appear to match in part those contained in table A10 of the attached spreadsheet from HM Treasury

http://www.hm-treasury.gov.uk/d/public_finances_databank.xls

As you can see the percentage of UK debt to GDP has been much higher in the past. This was partly due to events such as the Napoleonic and two World Wars but the totals were also high in the 1930s and 1960s.

Obviously overtime some factors have changed. For example, in the 19th Century Britain ran a current account trade surplus which funded the deficit. In addition much of the debt in Victorian times was probably held internally within the British Empire. Demographic trends were also likely to aid supporting the deficit from the late 1950s onwards. However, neither of these factors would really explain why Britain managed to negotiate much of the 1930s with far worse debt to GDP ratios than it has now. I am interested to know why it was thought sustainable then but is anathema now.

Anyone got any thoughts on the trends, or any explanations as to why the steepest falls in the debt to GDP ratio occurred under an Attlee Labour government that used rationing, high taxation, Keynesian infrastructure spending and nationalisation as its primary economic weapons while keeping unemployment below 500,000.

Edited by realcrookswearsuits

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I am interested to know why it was thought sustainable then but is anathema now.

The coming spending cuts aren't about bringing the debt down; they're about the deficit and about where it will take us if it continues -- particularly in the context of reduced GDP expectations.

That steep slope after WW2 ... some of it's down to post-war austerity, but I reckon (without specifically having looked into it) that by the 1970s it was more about debt being inflated away.

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However, neither of these factors would really explain why Britain managed to negotiate much of the 1930s with far worse debt to GDP ratios than it has now. I am interested to know why it was thought sustainable then but is anathema now.

Britain was a desperate place in the 1930, trying to build up for war in a depression wasn't fun.

WW2 cost the UK 3-4x its 1939 GDP, I believe WW1 was even more expensive.

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Yes the national debt has been much higher in the past. How does the argument stack up that post war generations are unique in ripping off todays 20/30 somethings and that you are the only generation in history who have been left a huge debt to repay by your parents?

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Yes the national debt has been much higher in the past. How does the argument stack up that post war generations are unique in ripping off todays 20/30 somethings and that you are the only generation in history who have been left a huge debt to repay by your parents?

And the large spike in the 1940s was caused by an Austrian. So they have nothing to crow about.

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There was a VAST pool of domestic savings in the early 20thC.

Quite the reverse now.

The Napoleonic War era is a bit economic pre-history (certainly for me) to be comparable.

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There was a VAST pool of domestic savings in the early 20thC.

Quite the reverse now.

The Napoleonic War era is a bit economic pre-history (certainly for me) to be comparable.

Do you have any evidence to support this statement?

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Yes the national debt has been much higher in the past. How does the argument stack up that post war generations are unique in ripping off todays 20/30 somethings and that you are the only generation in history who have been left a huge debt to repay by your parents?

Get it into your head (and the OP): it has been stated by huw already, the current hoo-ha is about DEFICIT which is the difference between what we take and what we spend each year. The difference is the bit which mounts on top of the pile of debt we owe as a nation. It effectively is the RATE at which our national debt is increasing and it is increasing at an alarming rate and until recently there was little sign of this credit card spending being brought under control. We don't have a world war as an excuse either (not for want of trying),

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Interesting graph. I wonder how meaningful GDP figures are for the WWII period, considering that much of industry was turned over to the war effort. How do you value a Spitfire? At cost, I suppose (£33,000, as you ask).

So it may be that the debt had not risen that much, but GDP had fallen.

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Thanks to the OP for reviving debate on this interesting chart.

Scepticus posted it a while ago.

I think the points I draw from it is that the debt levels should be manageable, especially as interest rates are low and likely to remain that way.

There is often a suggestion in the air of grave irresponsibility as this debt has been run up in peacetime but I'm not sure what's more irresponsible than getting caught up in a war.

It should be reduced because too much money is being spent on interest and there is, I suspect, an awful of of waste that can be cut.

But I can't see a decent reason to poop one's knickers over it. Should that last point be to the irritation of those that love gloom, je suis desole and forgive the absence of the accents.

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"Get it into your head (and the OP): it has been stated by huw already, the current hoo-ha is about DEFICIT."

I thought this thread was about that chart rather than this hoo hah.

And wouldn't we have had to have run quite a tasty deficit at some point back when to build up those debts?

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Read DEFICIT REDUCTION not National debt. One leads to the other and at the minute one is completely out of control.

Red herings may taste nice with a bit of pickle but they also act as distractions from VI's as to the real issues we face as a nation

Thanks to the OP for reviving debate on this interesting chart.

Scepticus posted it a while ago.

I think the points I draw from it is that the debt levels should be manageable, especially as interest rates are low and likely to remain that way.

There is often a suggestion in the air of grave irresponsibility as this debt has been run up in peacetime but I'm not sure what's more irresponsible than getting caught up in a war.

It should be reduced because too much money is being spent on interest and there is, I suspect, an awful of of waste that can be cut.

But I can't see a decent reason to poop one's knickers over it. Should that last point be to the irritation of those that love gloom, je suis desole and forgive the absence of the accents.

Edited by MinceBalls

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"Get it into your head (and the OP): it has been stated by huw already, the current hoo-ha is about DEFICIT."

I thought this thread was about that chart rather than this hoo hah.

And wouldn't we have had to have run quite a tasty deficit at some point back when to build up those debts?

Oh right, someone posts a chart saying there is nothing to worry about because national debt is not really as big as everyone thinks and then you stipulate anyone pointing out the rate of increase (DEFICIT) of said national debt is being off-topic.

Do you think they might be linked in any way?

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I have done a little investigating to see how 'unprecedented' is the debt crisis currently facing the UK

I came across the attached graph which I found rather surprising

uk-us-public-debt-since-1800.png

The figures appear to match in part those contained in table A10 of the attached spreadsheet from HM Treasury

http://www.hm-treasury.gov.uk/d/public_finances_databank.xls

You need to include consumer borrowing, this credit bubble was predominantly in the consumer sector and when combined with government debt paints are far more daunting spectre.

The US total debt is significantly higher than that of the 1930's. (If anyone has comparable UK charts I would be interested to see them.)

us-total-credit-market-as-of-gdp-1920-2008.png

saupload_debt_to_gdp.png

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Get it into your head (and the OP): it has been stated by huw already, the current hoo-ha is about DEFICIT which is the difference between what we take and what we spend each year. The difference is the bit which mounts on top of the pile of debt we owe as a nation. It effectively is the RATE at which our national debt is increasing and it is increasing at an alarming rate and until recently there was little sign of this credit card spending being brought under control. We don't have a world war as an excuse either (not for want of trying),

But a large proportion of that deficit is just temporary. It's no good just looking at the whole of that deficit as a lump.

It's all very well to try and scare people with the base figures, but something like 60% of the current deficit is caused by the recession, not any issues of overspending. Basically, the fall in taxes due to layoffs/lower profits and the rise in expenses due to additional social welfare payments in the slump is most of it. The issue with this part of the defecit will sort itself naturally over time as the economy returns to normal, leaving a much smaller persistent problem, the structural deficit, to deal with.

There is an issue to be addressed with the structural deficit. But this is far smaller than the "scary" top level figures suggest.

I.e. the top level deficit (including non-structural) is currently at about £150-175bn. Of that only £70bn is structural.

It's that £70bn that has to be cut, not the whole wodge of £150-175bn.

To do this requires cuts on the order of 10% of expenditure, not the 20-25% HPC'ers usually bat around in our chicken little way. Providing that could be cut, we would have a notional £0 deficit after this crisis had passed, that could be gradually grown into a surplus with GDP growth sufficient to pay off some of the debt in time for the next plunge (counter-cyclical keynesianism).

Saying we have to cut all £150-175bn to be solvent is just deficit-hawk scare mongering and is likely to be counter-productive to the UK economy as compared to "only" cutting the £70bn or so we really need to cut.

Especially as this would be removing a lot of high multiplier market support at exactly the wrong time in the business cycle (i.e. in a pro-cyclical rather than counter-cyclical way).

The Conservatives (and Lib Dems) recognise this and are only planning to cut that $70bn by the next election, even if HPC'ers don't and prefer instead to scaremonger with the higher "including slump caused deficits" figure. Hell, even the bond hawks recognise this.

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You need to include consumer borrowing, this credit bubble was predominantly in the consumer sector and when combined with government debt paints are far more daunting spectre.

The US total debt is significantly higher than that of the 1930's. (If anyone has comparable UK charts I would be interested to see them.)

us-total-credit-market-as-of-gdp-1920-2008.png

saupload_debt_to_gdp.png

I forgot about this one.

End of discussion about UK debt being manageable.

debt-sovereign.png

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You make the assumption that this is yet another recession like all the others in our recent history so we can forget about all the recessionary influences on the deficit:

something like 60% of the current deficit is caused by the recession

...

The issue with this part of the defecit will sort itself naturally over time as the economy returns to normal,

Which goes along the lines of we grow our way out of a V shaped recession. I believe this is an incorrect assumption. This is not like the other recessions in the last 40 years. It is the end of a debt cycle, pumping the economy won't work and your deficit increases due to recession could go on for a decade if left unchecked. Not a year or 2 prop to help us through it as you suggest.

On this i think you are fundamentally incorrect. Sounds like more Keynesian and latterly Blanchflower explainations of a far greater problem.

But a large proportion of that deficit is just temporary. It's no good just looking at the whole of that deficit as a lump.

It's all very well to try and scare people with the base figures, but something like 60% of the current deficit is caused by the recession, not any issues of overspending. Basically, the fall in taxes due to layoffs/lower profits and the rise in expenses due to additional social welfare payments in the slump is most of it. The issue with this part of the defecit will sort itself naturally over time as the economy returns to normal, leaving a much smaller persistent problem, the structural deficit, to deal with.

There is an issue to be addressed with the structural deficit. But this is far smaller than the "scary" top level figures suggest.

I.e. the top level deficit (including non-structural) is currently at about £150-175bn. Of that only £70bn is structural.

It's that £70bn that has to be cut, not the whole wodge of £150-175bn.

To do this requires cuts on the order of 10% of expenditure, not the 20-25% HPC'ers usually bat around in our chicken little way. Providing that could be cut, we would have a notional £0 deficit after this crisis had passed, that could be gradually grown into a surplus with GDP growth sufficient to pay off some of the debt in time for the next plunge (counter-cyclical keynesianism).

Saying we have to cut all £150-175bn to be solvent is just deficit-hawk scare mongering and is likely to be counter-productive to the UK economy as compared to "only" cutting the £70bn or so we really need to cut.

Especially as this would be removing a lot of high multiplier market support at exactly the wrong time in the business cycle (i.e. in a pro-cyclical rather than counter-cyclical way).

The Conservatives (and Lib Dems) recognise this and are only planning to cut that $70bn by the next election, even if HPC'ers don't and prefer instead to scaremonger with the higher "including slump caused deficits" figure. Hell, even the bond hawks recognise this.

Edited by MinceBalls

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But a large proportion of that deficit is just temporary. It's no good just looking at the whole of that deficit as a lump.

It's all very well to try and scare people with the base figures, but something like 60% of the current deficit is caused by the recession, not any issues of overspending. Basically, the fall in taxes due to layoffs/lower profits and the rise in expenses due to additional social welfare payments in the slump is most of it. The issue with this part of the defecit will sort itself naturally over time as the economy returns to normal, leaving a much smaller persistent problem, the structural deficit, to deal with.

There is an issue to be addressed with the structural deficit. But this is far smaller than the "scary" top level figures suggest.

I.e. the top level deficit (including non-structural) is currently at about £150-175bn. Of that only £70bn is structural.

It's that £70bn that has to be cut, not the whole wodge of £150-175bn.

To do this requires cuts on the order of 10% of expenditure, not the 20-25% HPC'ers usually bat around in our chicken little way. Providing that could be cut, we would have a notional £0 deficit after this crisis had passed, that could be gradually grown into a surplus with GDP growth sufficient to pay off some of the debt in time for the next plunge (counter-cyclical keynesianism).

Saying we have to cut all £150-175bn to be solvent is just deficit-hawk scare mongering and is likely to be counter-productive to the UK economy as compared to "only" cutting the £70bn or so we really need to cut.

Especially as this would be removing a lot of high multiplier market support at exactly the wrong time in the business cycle (i.e. in a pro-cyclical rather than counter-cyclical way).

The Conservatives (and Lib Dems) recognise this and are only planning to cut that $70bn by the next election, even if HPC'ers don't and prefer instead to scaremonger with the higher "including slump caused deficits" figure. Hell, even the bond hawks recognise this.

So the current debt is about 700bn. Let's say that it is going to grow to about 1,000bn before we reduce the structural and total deficit to zero when things have returned to normal.

The structural deficit is 70bn. Paying off the total debt over 25 years will require an additional 40 bn per year. In very rough terms, this looks like we need to cut spending by about 15%.

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So the current debt is about 700bn. Let's say that it is going to grow to about 1,000bn before we reduce the structural and total deficit to zero when things have returned to normal.

The structural deficit is 70bn. Paying off the total debt over 25 years will require an additional 40 bn per year. In very rough terms, this looks like we need to cut spending by about 15%.

All based on the assumption of FUTURE growth. Bearing in mind the only growth that has existed in the last 6 months has been government funded growth... based on a MASSIVE increase in deficit... that is unsustainable. So how do we sort this out if the growth doesn't materialise? Splat.

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It's all very well to try and scare people with the base figures, but something like 60% of the current deficit is caused by the recession, not any issues of overspending. Basically, the fall in taxes due to layoffs/lower profits and the rise in expenses due to additional social welfare payments in the slump is most of it. The issue with this part of the defecit will sort itself naturally over time as the economy returns to normal, leaving a much smaller persistent problem, the structural deficit, to deal with.

So a normal economy is one that Bankrupts the entire financial system, good one. Try joining up the dots to understand that the current economy is normal, it is the pre 2007 that is not normal because it was being upheld by Huge tax receiptsfrom the finance sector driven by fraudulet banking and debt expansion that was hidden and unpayable. The recession and booming deficit is a result of those fraudulent taxes and economy dissappearing. Without further debt expansion in the financial sector or now Govt there is no growth, there is only trying to pay back the unpayable debts that have been accrued over the last decade

Edited by Tamara De Lempicka

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Well said. People forget that in the 30's and 50's we had massive industry and exports which helped pay off debt. We also didn't have huge liabilities such as the NHS, the benefits system, old age pensions etc etc. Are these counted in the national debt ot not? (or deficit calculations?) They certainly reduce the capacity to repay debt or bring down deficits.

So a normal economy is one that Bankrupts the entire financial system, good one. Try joining up the dots to understand that the current economy is normal, it is the pre 2007 that is not normal because it was being upheld by Huge tax receiptsfrom the finance sector driven by fraudulet banking and debt expansion that was hidden and unpayable. The recession and booming deficit is a result of those fraudulent taxes and economy dissappearing. Without further debt expansion in the financial sector or now Govt there is no growth, there is only trying to pay back the unpayable debts that have been accrued over the last decade

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However, neither of these factors would really explain why Britain managed to negotiate much of the 1930s with far worse debt to GDP ratios than it has now. I am interested to know why it was thought sustainable then but is anathema now.

Britain came off gold standard in 1931 - an one-off event which helped the reserves/debt ratio.

Nowadays the same happens when a country unpegs/lets its currency float/devalues.

Any got any thoughts on the trends, or any explanations as to why the steepest falls in the debt to GDP ratio occurred under an Attlee Labour government that used rationing, high taxation, Keynesian infrastructure spending and nationalisation as its primary economic weapons while keeping unemployment below 500,000.

1950s-1960s is when Great Depression really ended judging by DJIA index.

FTSE was launched only in 1984 http://www.ftse.com/Indices/UK_Indices/Downloads/FTSE100_Index_Factsheet.pdf so no direct comparison with DJIA before 1984 :-(

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  • 259 Brexit, House prices and Summer 2020

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