Quick Question About Uk Debt

['Bart']

From something I remember reading on here, either 2016 or 2017 is a crunch time for UK debt. We've got until then as it's long dated debt (I think).

I've tried Google but I'm clearly not typing in the right search terms. Either that or I'm wrong about those dates.

Can anyone help with a link or two?

[libspero]

From something I remember reading on here, either 2016 or 2017 is a crunch time for UK debt. We've got until then as it's long dated debt (I think).

I've tried Google but I'm clearly not typing in the right search terms. Either that or I'm wrong about those dates.

Can anyone help with a link or two?

Not sure if this helps..

From here: Duncan’s Economic Blog

[Edit: Data set originally from the DMO]

Edited November 27, 2011 by libspero

[frederico]

I don't know, but every time I see that sort of data I wonder why people say it's all long term, it aint.

['Bart']

Not sure if this helps.

Certainly looks to be on the right track, cheers.

[FreeTrader]

Bart, if you go to this page on the DMO website you'll find its quarterly reports. There's a chart in these that shows the redemption profile for UK gilts (it's on page 4 in the latest report).

For some reason they've neglected to put a legend in the latest report, but the green bars are conventional gilts and the gold ones are index-linked.

[gadget]

I don't know, but every time I see that sort of data I wonder why people say it's all long term, it aint.

13.99 years is the average maturity of UK government debt according to Peston.

http://www.bbc.co.uk/news/business-15717770

Clearly not ALL the debt is long term, just most of it. Most other countries have an average around 5-7 years.

[Gigantic Purple Slug]

I don't know, but every time I see that sort of data I wonder why people say it's all long term, it aint.

It's not all long term, but a significant proportion of it is, which gives some breathing space.

People here often quote the amount of debts a country has, but take no account of the repayment date. Quoting the amount is only half the story.

That said we've still got a mighty task ahead to get it under control. That, though is something in the future, whereas the PIIGS issues with short term debt are something the markets are focussing on now.

[The Knimbies who say No]

I've come to the conclusion that the most obnoxious thing a Government can do is to flog bonds with an expiration date beyond the current Parliament's latest date of expiry. It just hamstrings future elected Governments. One of the most pernicious and democtratically corrosive actions a Government can undertake imo.

The amount of debt interest we pay is a blooming joke, you rarely hear of it being included in the final budget figures for projects for which debt is issued rather than savings built up.

Edited November 27, 2011 by cheeznbreed

[libspero]

Bart, if you go to this page on the DMO website you'll find its quarterly reports. There's a chart in these that shows the redemption profile for UK gilts (it's on page 4 in the latest report).

For some reason they've neglected to put a legend in the latest report, but the green bars are conventional gilts and the gold ones are index-linked.

Without wishing to derail Bart's thread too far, it's interesting looking at the projected financing requirement for next year (from the link).

Roughly £160bn per year.

And QE is running at £75bn per six months...

Hmmm....

[Gigantic Purple Slug]

I've come to the conclusion that the most obnoxious thing a Government can do is to flog bonds with an expiration date beyond the current Parliament's latest date of expiry. It just hamstrings future elected Governments. One of the most pernicious and democtratically corrosive actions a Government can undertake imo.

The amount of debt interest we pay is a blooming joke, you rarely hear of it being included in the final budget figures for projects for which debt is issued rather than savings built up.

Unfortunately it's one of the best things they can do at the moment to make the whole situation more manageable.

[Democorruptcy]

What the B of E needs is to be more innovative like Mexico

http://tilt.ft.com/#!posts/2011-08/27631/mexico-may-issue-100-yr-debt-amig-global-market-rout

[frederico]

It's not all long term, but a significant proportion of it is, which gives some breathing space.

People here often quote the amount of debts a country has, but take no account of the repayment date. Quoting the amount is only half the story.

That said we've still got a mighty task ahead to get it under control. That, though is something in the future, whereas the PIIGS issues with short term debt are something the markets are focussing on now.

tbh I don't buy this arguement, 100bn in the next couple of years is 100bn, this is going to get out of control sooner than you think.

money is money, debt is debt, interest rates can go up as well as down.

a mortgage has to be paid, the interest is waste.

[The Knimbies who say No]

Unfortunately it's one of the best things they can do at the moment to make the whole situation more manageable.

Printing money is never a route to prosperity.

The Government could decide not to increase public spending from £660 billion to £740 billion over this Parliament instead. I don;t buy the argument that not raising spending by 13% in five years will make a fiscal situation unmanageable. There is literally billions of easily-identifiable no brainer savings to be made, but this lot simply cannot bring themselves to do it for some reason.

[frederico]

Printing money is never a route to prosperity.

The Government could decide not to increase public spending from £660 billion to £740 billion over this Parliament instead. I don;t buy the argument that not raising spending by 13% in five years will make a fiscal situation unmanageable. There is literally billions of easily-identifiable no brainer savings to be made, but this lot simply cannot bring themselves to do it for some reason.

yes, well it will either be cut or default, no other way, timescale is the only question.

they were counting on growth to take away the pain, won't happen though without big changes.

[Gigantic Purple Slug]

tbh I don't buy this arguement, 100bn in the next couple of years is 100bn, this is going to get out of control sooner than you think.

money is money, debt is debt, interest rates can go up as well as down.

a mortgage has to be paid, the interest is waste.

You can't "buy" any argument because no one knows for certain what's going to happen over the next few years. Will GB output grow enough to close the debt ? Will europe collapse and what will be the effects of this ? Will Merv successfulyl manage to inflate away the debt while the markets attention is focussed elsewhere ? Will we discover a vast new energy resource under Blackpool Tower ?

There are some things you can say. Firstly, its politically easier to cut the budget deficit over a longer timescale than a shorter one. Hence the length of debt maturity helps. Secondly that the UK does not need to default if it prints its way out (partial default).

The question is whether the markets judge our policy of inflation/printing better/worse than anyone elses policy who may not have the same flexibility. At the moment it seems like they do. That position of course can change.

[Gigantic Purple Slug]

Printing money is never a route to prosperity.

The Government could decide not to increase public spending from £660 billion to £740 billion over this Parliament instead. I don;t buy the argument that not raising spending by 13% in five years will make a fiscal situation unmanageable. There is literally billions of easily-identifiable no brainer savings to be made, but this lot simply cannot bring themselves to do it for some reason.

Probably because they want to get re elected.

They are walking a tightrope in nearly every respect. But they have no choice. It's about getting the balance right without pissing to many people off and placating the markets.

[bmf]

You can't "buy" any argument because no one knows for certain what's going to happen over the next few years. Will GB output grow enough to close the debt ? Will europe collapse and what will be the effects of this ? Will Merv successfulyl manage to inflate away the debt while the markets attention is focussed elsewhere ? Will we discover a vast new energy resource under Blackpool Tower ?

There are some things you can say. Firstly, its politically easier to cut the budget deficit over a longer timescale than a shorter one. Hence the length of debt maturity helps. Secondly that the UK does not need to default if it prints its way out (partial default).

The question is whether the markets judge our policy of inflation/printing better/worse than anyone elses policy who may not have the same flexibility. At the moment it seems like they do. That position of course can change.

One thing we can say is that our economy is very finely balanced thanks to the high degree of leverage. We have seen that when leverage is high it only takes a nudge to push things into an increasingly unstable mess.

I agree with you that we can't say. However as the required "nudge" gets smaller and smaller the more probably such an event will happen.

Something akin to a 6 on the Richter scale being common but fine if your foundations are good. But if you build glass houses held together by glue...

Finally people always say we can print out of this. Didn't Argentina have it's own currency?

Edited November 27, 2011 by bmf

[Gigantic Purple Slug]

One thing we can say is that our economy is very finely balanced thanks to the high degree of leverage. We have seen that when leverage is high it only takes a nudge to push things into an increasingly unstable mess.

I agree with you that we can't say. However as the required "nudge" gets smaller and smaller the more probably such an event will happen.

Something akin to a 6 on the Richter scale being common but fine if your foundations are good. But if you build glass houses held together by glue...

Finally people always say we can print out of this. Didn't Argentina have it's own currency?

I'd agree with that. The balance is fine.

Don't know about the Argentines. Maybe their debt was denominated in USD rather than currency they could print.

[gadget]

money is money, debt is debt, interest rates can go up as well as down.

a mortgage has to be paid, the interest is waste.

What noone here talks about and is probably the most important thing is who the government owes the money to.

Japan has a debt to gdp ratio of 220% and yet interest rates stay at 0%. Because it owes all this money to its own pensioners and taxpayers. If you owe your wife £1million it doesn't make your overall household have a debt problem (though i predict some marital strife).

And here interest costs are not a cost to the economy just internal transfers. From one taxpayer to another via the government.

Greece has a massive debt problem because it owes the money to french and german banks. Every euro of interest it pays out is another euro draining out of their economy, making the debt situation worse...

[bmf]

I'd agree with that. The balance is fine.

Don't know about the Argentines. Maybe their debt was denominated in USD rather than currency they could print.

Ah - I think they had very high inflation then linked to the dollar then went down the tubes. Must read more on this. Clearly having their own currency didn't prevent very high inflation and a crisis that caused the link to the dollar.

I just don't like to see this "hey baby we can print and it's all good" attitude. We have to convince those we import from that our currency has real value. So far that's not happening as the pound is down down down.

[The Knimbies who say No]

Probably because they want to get re elected.

They are walking a tightrope in nearly every respect. But they have no choice. It's about getting the balance right without pissing to many people off and placating the markets.

It's a funny old game, as much of the potential easy savings are sure-fire vote winners in my book. I just don't see how continually increasing spending is consistent with a supposed fiscal emergency. There are always options, they just seem to choose the ones that involve spending more and make the situation needlessly worse- eg giving hundreds of millions of pounds of borrowed money as aid to India and Pakistan. It's nuts.

[admann]

money is debt, interest rates can go up as well as down.

a mortgage has to be paid, the interest is someone else's debt.

Corrected for you..

[DTMark]

Printing money is never a route to prosperity.

Ah, but whose prosperity

I reckon there's about another trillion of QE left to go yet.