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How Much Of The Deficit Was Spent On The Banks?


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That's the classic confusion of debt vs deficit.

The big problem is the deficit, aka the rate of growth of the debt. You could service a £100k mortgage (the debt) on a £30k salary. But if the mortgage is growing by another £20k each year (the deficit) you're struggling.

And when the whole economy is struggling, that £30k is unlikely to rise and at risk of falling (the double dip).

Bank bailouts are part of the debt because they were part of the deficit in recent years.

So why is the deficit still so high? Because it's been growing over a decade of profligate public spending, but was masked Enron-style by creative finance.

Well put. Of course, if you include all off-balance sheet liabilities, like future pension payments, PFI contracts, national rail debt, the actual National Debt is...

8 TRILLION POUNDS or about £300,000 per family (including the non-hard working ones). Think we'll ever get rid of this, other than through direct default (instant death to the pound) or stealth default via high inflation (the current plan and a slow painful death for the pound)?

If they know, can someone here please tell me why this isn't a problem and the pound will be ok?

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Tosh.

I can't explain your belief system, however it is just that. The source of all our problems is our monetary system combined with our inability to realise we live on planet Earth. So you can vote for whoever you want and nothing will change, the end is nigh for our current monetary system, but it will also take down our economic and political system. The world will keep turning but not in the way you hope for. Sorry.

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It seems the New Labour spin machine has decided to contest the accusation that the Coalition inherited a mess caused by Labour by saying that ...

'most of the deficit is because we bailed out the naughty banks and we had to do that otherwise people's savings were at risk - we did what we had to do etc.'

... and ...

'the deficit before the banking crisis was lower than they inherited in 1997'

I have heard this argument advanced, in almost identical words, a few times over the last week. It seems old habits die hard and, presumably, anyone senior in New Labour has been told what the message is. And to repeat it over and over again.

My question is ... is it true?

How much of our current borrowing is due to Brown borrowing money to bail out the banks?

And, what was the deficit in 1997 and 2007?

Jeezus, I just got it. Labour spin machine is much more cunning than I had thought.

Look at this post:

How did you work that one out then? The banks have saddled us with debts that will take generations to pay off.

Sounds like the same magical ponzi accounting that led us into this mess in the first place.

Most "members of the public" think that deficit is debt. If now labour politicians say that the "deficit" was lower in 2007 than in 1997, these "members of the public" will "logically" conclude that the banks saddled us with the national debt! :o

Am I onto something here??

.

Edited by Tired of Waiting
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I can't explain your belief system, however it is just that. The source of all our problems is our monetary system combined with our inability to realise we live on planet Earth. So you can vote for whoever you want and nothing will change, the end is nigh for our current monetary system, but it will also take down our economic and political system. The world will keep turning but not in the way you hope for. Sorry.

whether right or wrong, your views aren't really helpful to the OP. He's asked a question which deserves a considered answer. If a kid asks how to use a computer, I'm pretty sure you wouldn't tell him the national grid woul dsoon be no more and to concentrate on that, so why lead off about a SHTF scenario on this thread?

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Whilst I accept the etiology of this rhetoric, I'm trying to make clear the distinctions between the various capital sums and cash flows. I believe this is a valuable thing to do because it arms people to make sense of the arguments put forward.

Believe me, as a sahreholder and saver, nobody is more aware of the subtlties glossed over by the sloppy usage of the nebulous term "bank". If I could make everyone refer to "bank management" and "bank employees" instead, I would.

My personal view is to tax the hell out of CDO/CDS/SPV transactions based upon notional value. These transactions are optional, and I would introduce regulation that would not allow the costs associated with optional proprietary transactions to be passed on to the customers. The banks would then be operated like public utilities, only able to pass through costs that are unavoidable, whilst if CDO/CDS/SPV or other optional, speculative transactions are entered into, they are entirely at their own costs, to be published in a register of on a web site for public access.

Something like this would, no doubt, cause a gradual unwind and spell an end to the globally destabilizing casino that currently exists in the financial system, and provide a boost in revenue to the tax man in the process. But sadly no politician is considering it, from my reading.

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I can't explain your belief system, however it is just that. The source of all our problems is our monetary system combined with our inability to realise we live on planet Earth. So you can vote for whoever you want and nothing will change, the end is nigh for our current monetary system, but it will also take down our economic and political system. The world will keep turning but not in the way you hope for. Sorry.

Yadda yadda.

Chaps like you were wetting yourself three years ago that FIAT was on the brink of collapse...it didn't happen and now you've changed your timelines.

You are right - it will ultimately take down our economic and political systems. But it will replace it with something far more innovative and nefarious - not the system or non-system you think is coming.

Edited by Alan B'Stard MP
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The real costs the bankers have imposed on us all...

1) HPI- their securitisation games have perverted the housing market landing millions of people in massive debt and negative equity.

2) The largest recession since the 30's putting millions out of work with all the social costs involved.

3) The bailout itself plus all the dodgy paper we have taken on from the likes of RBS.

4) Pensions destroyed. A lot of the MBS's were sold to pension funds and the way this is playing out a lot this stuff will turn out to be crap.

And who knows what other surprises are lurking out there in the form of derivative time bombs waiting to go off.

Never in history have so many people been so screwed by so few.

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My personal view is to tax the hell out of CDO/CDS/SPV transactions based upon notional value.

My gut reaction is it would not work in that the bank employees would find a way to make it pay them even greater bonuses. But either way, not really for discussion here. Have you raised this on another thread?

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Most "members of the public" thinks that defict is debt. If now labour politicians say that the "deficit" was lower in 2007 than in 1997, these "members of the public" will "logically" conclude that the banks saddled us with the national debt! :o

Am I onto something here??

that outside the core labour vote, no-one will vote labour for a very long time

people will associate Gordon Brown with corrupt statism, and little more

core laboru voters will say the capitalists mugged us, because they do not want to admit the truth

Edited by Si1
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My gut reaction is it would not work in that the bank employees would find a way to make it pay them even greater bonuses. But either way, not really for discussion here. Have you raised this on another thread?

No. It is a bit outside the scope of this one, agreed. Bonuses are optional too. At least by definition. My view of the financial system is a bit jaundiced, there is a need for a Cromwellian approach to this industry, in my view.

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The real costs the bankers have imposed on us all...

1) HPI- their securitisation games have perverted the housing market landing millions of people in massive debt and negative equity.

2) The largest recession since the 30's putting millions out of work with all the social costs involved.

3) The bailout itself plus all the dodgy paper we have taken on from the likes of RBS.

4) Pensions destroyed. A lot of the MBS's were sold to pension funds and the way this is playing out a lot this stuff will turn out to be crap.

And who knows what other surprises are lurking out there in the form of derivative time bombs waiting to go off.

Never in history have so many people been so screwed by so few.

Tis true, however, but I can't hate them for it, thanks to a large dose of good luck and serendipity, the situation they have created is pure gold, as far as I'm concerned.

Edited by General Congreve
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Tis true, however, but I can't hate them for it, thanks to a large dose of good luck and serendipity, the situation they have created is pure gold, as far as I'm concerned..

Where are you going to trade your gold if the normal markets are outlawed?

Edited by Alan B'Stard MP
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It seems the New Labour spin machine has decided to contest the accusation that the Coalition inherited a mess caused by Labour by saying that ...

'most of the deficit is because we bailed out the naughty banks and we had to do that otherwise people's savings were at risk - we did what we had to do etc.'

... and ...

'the deficit before the banking crisis was lower than they inherited in 1997'

I have heard this argument advanced, in almost identical words, a few times over the last week. It seems old habits die hard and, presumably, anyone senior in New Labour has been told what the message is. And to repeat it over and over again.

My question is ... is it true?

How much of our current borrowing is due to Brown borrowing money to bail out the banks?

And, what was the deficit in 1997 and 2007?

No, it isn't true. The budgetary deficit is nothing to do with bailing out the banks in the sense of "we gave them money, and that money made a hole in the operational finances".

There was no deficit in 2001. Brown committed to Tory spending plans for the first term and we actually ran a small surplus (I think it was £4 billion) in that year.

In 1997, the public debt was £348 billion. For 2011, it is estimated to be £938 billion (this is the very conservative measure and does not include PFI etc).

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Where are you going to trade your gold if the normal markets are outlawed?

Very good point. After all, those with gold in Iceland not only preserved their wealth but profited, until the government very quickly imposed capital controls so that you couldn't leave the country with it and made it law that it could only be exchanged at the old pre-crash exchange rate. Bunch of villains.

Of course, of those that have gold in Iceland, I'm sure about zero of them have taken the state up on their generous offer of exchanging at the old rate and have been busy working out ways to move it out of the country and exchange it in Europe, or elsewhere, for foreign currency, if indeed they see fit to trade it in yet, which I'm sure only the desperate for cash do.

This also demonstrates the importance of buying physical bullion, as under such circumstances the govt. can quickly legislate (and possibly retrospectively) on terms for selling gold ETF's and holdings in gold pools or vaults, like goldmoney and bullionvault (all of which can be traced electronically with ease).

If the UK govt. imposed gold controls, due to a sterling collapse, it is important to remember mainland Europe is not too far away. A small boat ride, even a ferry ride (haven't been frisked or searched on one of these, plus bullion is easily stashed in the recesses of a car - don't think they've invented a robot bullion sniffing dog yet), or (if you just want to cash a few ounces) even put it in your wallet with a bunch of other loose change and fly it over, the sleepy security at the airport don't care about coins in a wallet.

However, in the case of total fiat collapse and widespread capital controls you'll have to wait for the black market to spring into life, and sure enough it will, before you can get the true value from your bullion.

Where there's a will there's a way. When the US Govt. outlawed gold ownership in 1933 it is estimated less than 1% of holders turned into their gold to their crooked govt. Another reason it's important to just buy bullion, to stay under the radar as much as possible from the thieving authorities.

At the end of the day, come the collapse, I'd rather be holding valuable physical gold that requires a bit of effort to trade in for full value, than a bunch of numbers on a computer screen worth the sum of f4ck all.

Edited by General Congreve
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oh do come on. when these situs occur the black market goes into overdrive.

The black market ? Like in Zimbabwe which offered bread at very small premium if paid in gold :P

Your gold is only worth anything if you are prepared to run the gauntlet of border security.

Edited by Alan B'Stard MP
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