jplevene Posted May 14, 2012 Share Posted May 14, 2012 It makes me sick when I hear people say that we should not be doing austerity and instead we should borrow more and invest to promote growth, just like the new loony French President has promised. The reason why austerity or streamlining or frugal or whatever you want to call it is the only solution is: 1) When things were booming, the country was still in the red, we were still borrowing, even though tax receipts were at an all time high. 2) Debt interest is the country's second biggest expense after benefits and is still growing as we are still spending more than we earn. If we are not carefull it could become our biggest expense. 3) Now I agree, if we have no debt and are in the black, borrowing to boost the economy is a good idea, however, the amount of money we would need to borrow and spend just to get the economy back to mid labour levels would be in the hundreds of billions or maybe trillions. 4) Thing is that these levels aren't enough, as they were still in the red, thus we would need to borrow and spend trillions more than this so that the economy is better than when it was good so that we are out of the red. 5) Problem now is that when things were good we didn't have the huge interest bill to pay so now we have to be better than the boom,and better than "better than it was", and it is unfathomable how much we would need to borrow to get to this level and if anybody would lend us. 6) Even if we could get the economy to boom better than ever, our interest bill would grow to such huge levels, we would be constantly in the red and just be chasing our tails trying to overtake spiralling interest costs with tax receipts. Austerity I think is a bad word, a better word is streamlining as we need to do an efficiency drive in this country, get rid of the waste and cut back on what we could do without as if this debt isn't paid we will be in the same boat as Greece or as England in the 70's when we were bailed out by the IMF. Quote Link to comment Share on other sites More sharing options...
campervanman Posted May 14, 2012 Share Posted May 14, 2012 It makes me sick when I hear people say that we should not be doing austerity and instead we should borrow more and invest to promote growth, just like the new loony French President has promised. The reason why austerity or streamlining or frugal or whatever you want to call it is the only solution is: 1) When things were booming, the country was still in the red, we were still borrowing, even though tax receipts were at an all time high. 2) Debt interest is the country's second biggest expense after benefits and is still growing as we are still spending more than we earn. If we are not carefull it could become our biggest expense. 3) Now I agree, if we have no debt and are in the black, borrowing to boost the economy is a good idea, however, the amount of money we would need to borrow and spend just to get the economy back to mid labour levels would be in the hundreds of billions or maybe trillions. 4) Thing is that these levels aren't enough, as they were still in the red, thus we would need to borrow and spend trillions more than this so that the economy is better than when it was good so that we are out of the red. 5) Problem now is that when things were good we didn't have the huge interest bill to pay so now we have to be better than the boom,and better than "better than it was", and it is unfathomable how much we would need to borrow to get to this level and if anybody would lend us. 6) Even if we could get the economy to boom better than ever, our interest bill would grow to such huge levels, we would be constantly in the red and just be chasing our tails trying to overtake spiralling interest costs with tax receipts. Austerity I think is a bad word, a better word is streamlining as we need to do an efficiency drive in this country, get rid of the waste and cut back on what we could do without as if this debt isn't paid we will be in the same boat as Greece or as England in the 70's when we were bailed out by the IMF. Surely the argument should be about investing whatever money there is wisely rather than either spending it on things that were unsustainable in boom times or on things that do not create the wealth to pay off the debt in bad times. The choice is not between throwing money down the drain and not spending at all. Getting rid of waste and cutting back won't create the wealth by itself. Quote Link to comment Share on other sites More sharing options...
Britney's Piers Posted May 14, 2012 Share Posted May 14, 2012 (edited) UK public and private debt will be 10 trillion Gbp. by 2015. Austerity (what austerity?) is rearranging deckchairs. Edited May 14, 2012 by Britney's Piers Quote Link to comment Share on other sites More sharing options...
mikthe20 Posted May 14, 2012 Share Posted May 14, 2012 What I really hate is when these champagne socialists say "we don't have a plan B". FFS, austerity IS plan B. Plan A was spend, spend, spend and look where it got us! Quote Link to comment Share on other sites More sharing options...
Superted187 Posted May 14, 2012 Share Posted May 14, 2012 The Greek economy has shrunk by 20% since 2009. How are they going to pay down their debt with those dwindling tax receipts? Quote Link to comment Share on other sites More sharing options...
madpenguin Posted May 14, 2012 Share Posted May 14, 2012 (edited) Austerity I think is a bad word, a better word is streamlining as we need to do an efficiency drive in this country, get rid of the waste and cut back on what we could do without as if this debt isn't paid we will be in the same boat as Greece or as England in the 70's when we were bailed out by the IMF. We are already at the same point as Greece, 1 trillion debt (official government figure) 4 trillion (if you also include government pension and PFI deals in the mix which makes us a darn sight worse, only a better industrial capacity and the banking industry keeping us afloat, as well as the BOE printing money and fudging the figures). People talk all the time about cutting "waste" but the truth is there's not much left to cut, at least in terms of normal day top day running the country terms. I did a job for a small city council a few years ago, I was shocked at what they had to work with, they were literally doing string and sealing wax jobs on keeping the city running, look at the cuts to the armed forces, and government departments, are we better employing those people and getting things done or running departments on a shoe string whilst the "surplus staff" languish on benefits Funnily enough if the "waste" is in employing too many staff you are probably saving the country money overall and keeping the local economy going at least. Much of the debt we've incurred is due to propping up banks who have made bad decisions, what value are we getting back from them in return for our money? (and I really do mean our money) Edited May 14, 2012 by madpenguin Quote Link to comment Share on other sites More sharing options...
ska_mna Posted May 14, 2012 Share Posted May 14, 2012 UK public and private debt will be 10 trillion Gbp. by 2015. Austerity (what austerity?) is rearranging deckchairs. +1 It won't work. The only way out is to reinvent our monetary system and/or start running a massive trade surplus. Huge and growing debt is just part and parcel of our system, like it or not. You can't argue for austerity without also arguing for the things I mentioned above. Otherwise it's turkeys (us) voting for Christmas (elite sat at the dining table). Hint: blue and red teams are still way off the mark. Quote Link to comment Share on other sites More sharing options...
bmf Posted May 14, 2012 Share Posted May 14, 2012 (edited) The Greek economy has shrunk by 20% since 2009. How are they going to pay down their debt with those dwindling tax receipts? Has it shrunk by 20%, or was 20% of it a load of old b0ll0cks and now they aren't whacking it all on a tab marked "never"? Before the crisis wasn't "normal". We won't be getting back to "normal" ever thank god, because it's destroying our children's futures. Either way it's all too little too late. Brits - enjoy your tat and tellies whilst you have 'em, otherwise it was all for nothing instead of next to nothing. edit: remove censor of b0ll0cks Edited May 14, 2012 by bmf Quote Link to comment Share on other sites More sharing options...
scrappycocco Posted May 14, 2012 Share Posted May 14, 2012 but labour guberment growth is investing in public sector isn't it? loads of non jobbers, call centres, quangos, elf and safety, nhs managers, consultants, councils outsourcing just to make up ever increasing budget, liar loans, high house prices .....then when the money stimulant runs out, we try to cut them but the onions get involved........ you have to think of the public sector as a junkie on the most addictive drug, if you give it more money you can't give it less, it will only except more or it will strike.... ten thousand politicians by 2025..........whole of london will become one big trough...... Quote Link to comment Share on other sites More sharing options...
erranta Posted May 14, 2012 Share Posted May 14, 2012 (edited) It makes me sick when I hear people say that we should not be doing austerity and instead we should borrow more and invest to promote growth, just like the new loony French President has promised. The reason why austerity or streamlining or frugal or whatever you want to call it is the only solution is: 1) When things were booming, the country was still in the red, we were still borrowing, even though tax receipts were at an all time high. 2) Debt interest is the country's second biggest expense after benefits and is still growing as we are still spending more than we earn. If we are not carefull it could become our biggest expense. 3) Now I agree, if we have no debt and are in the black, borrowing to boost the economy is a good idea, however, the amount of money we would need to borrow and spend just to get the economy back to mid labour levels would be in the hundreds of billions or maybe trillions. 4) Thing is that these levels aren't enough, as they were still in the red, thus we would need to borrow and spend trillions more than this so that the economy is better than when it was good so that we are out of the red. 5) Problem now is that when things were good we didn't have the huge interest bill to pay so now we have to be better than the boom,and better than "better than it was", and it is unfathomable how much we would need to borrow to get to this level and if anybody would lend us. 6) Even if we could get the economy to boom better than ever, our interest bill would grow to such huge levels, we would be constantly in the red and just be chasing our tails trying to overtake spiralling interest costs with tax receipts. Austerity I think is a bad word, a better word is streamlining as we need to do an efficiency drive in this country, get rid of the waste and cut back on what we could do without as if this debt isn't paid we will be in the same boat as Greece or as England in the 70's when we were bailed out by the IMF. The economy would be tripping along with those Trillions redistributed amongst the population instead of fraudulantly wasted supporting house prices, THE CITY SCAM and bankers We cannot kickstart UK economy because too many vi's have 'controlling interests' which are interfering with free? markets and non-level playing fields! Edited May 14, 2012 by erranta Quote Link to comment Share on other sites More sharing options...
madpenguin Posted May 14, 2012 Share Posted May 14, 2012 In a Daily Telegraph today they posted this comparing US Government debt to a households debt: http://www.telegraph.co.uk/finance/debt-crisis-live/9263419/Debt-crisis-as-it-happened-May-14-2012.html#disqus_thread Someone in comments did this for the UK: United Kingdom tax revenue: £437,594,000,000 Total budget: £703,400,000,000 New debt (deficit) £265,806,000,000 National Debt*: £1,003,900,000,000 Budget Cuts: £0 Interest payments: £43,900,000,000 Annual family income: £43,759 Money family spent: £70,340 New Debt on credit card: £26,581 Outstanding balance on credit card: £100,390 Budget cuts: £0 Interest payments £4,390 Sources: http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.pdf http://www.ukpublicspending.co.uk/total_spending_2012UKbn Pretty grim figures Quote Link to comment Share on other sites More sharing options...
Stay Beautiful Posted May 14, 2012 Share Posted May 14, 2012 Someone in comments did this for the UK: United Kingdom tax revenue: £437,594,000,000 Total budget: £703,400,000,000 New debt (deficit) £265,806,000,000 National Debt*: £1,003,900,000,000 Budget Cuts: £0 Interest payments: £43,900,000,000 Annual family income: £43,759 Money family spent: £70,340 New Debt on credit card: £26,581 Outstanding balance on credit card: £100,390 Budget cuts: £0 Interest payments £4,390 Quote Link to comment Share on other sites More sharing options...
singlemalt Posted May 14, 2012 Share Posted May 14, 2012 The problem with severe austerity is that the people living under it quickly realise that you only get a finite amount of life so like Homer Simpson would say, "Screw that!". Quote Link to comment Share on other sites More sharing options...
jammo Posted May 14, 2012 Share Posted May 14, 2012 Budget cuts: £0 So that's what they mean when they say we are all in it together. What they mean is, the national debt, and ergo debt interest payment is growing more and more. Our taxes are going toward paying for less and less services (owing to the fact that a growing proportion of it must be going towards debt interest - never mind inflation), therefore each and every one of us is paying for their mis-management of the economy. So we really are all in it together after all. Good to know. Quote Link to comment Share on other sites More sharing options...
DungBeetle Posted May 14, 2012 Share Posted May 14, 2012 (edited) The Greek economy has shrunk by 20% since 2009. How are they going to pay down their debt with those dwindling tax receipts? Austerity only works if you can encourage a bit of inflation. Greece is a basket case economy pegged to a stronger currency. If they cannot inflate they need to default. I doubt there are many example of Governments paying down their debts without inflation or a default. Edited May 14, 2012 by DungBeetle Quote Link to comment Share on other sites More sharing options...
Bland Unsight Posted May 14, 2012 Share Posted May 14, 2012 The Greek economy has shrunk by 20% since 2009. How are they going to pay down their debt with those dwindling tax receipts? Dude - they are not going to pay down those debts - they have already defaulted on them once - the ISDA ruled that it was a default. Next they are going to default some more. And they are going to keep defaulting more and more till the debt that remains, the (Senior)^n - where n is the iterations of default - can be paid off. Through this process they will find new debt ever more expensive. Sad but true, the simple argument is the right one - you cannot solve a problem of unsustainable debt with more debt. The OP is bang on the money - there's nothing wrong with a bit of deficit spending when the problem is a passing phase. When the problem is the wheels coming off because the level of debt is the fundamental systemic problem the option of more debt is no longer on the table. If the fire is going out and that is the problem, adding a little petrol is dangerous but may help. If the problem is that you are on fire, more petrol will only make things worse. We made these mistakes already - with a lack of respect for debt. We've been making them earnestly for decades and now we've broken the money and broken the banks. There are two options: try austerity or accept that it's too late and press the reset button and face the consequences. Neither is pretty. The idea that we'll borrow and get some growth is nonsense. All our growth for the last 30 years was borrowing and we just maxed out the credit card and moved from the teaser rate to the standard rate. This is going to be very ugly. Quote Link to comment Share on other sites More sharing options...
Olebrum Posted May 14, 2012 Share Posted May 14, 2012 (edited) What we had was a crisis in the markets now packaged as a crisis of public spending. Austerity is not going to fix anything but feel free to keep on chanting the mantra as the country slowly sinks below the waves. Edited May 14, 2012 by Olebrum Quote Link to comment Share on other sites More sharing options...
ska_mna Posted May 14, 2012 Share Posted May 14, 2012 One of the reasons given by Liam Halligan in the Telegraph who argues for austerity, is that it means our bonds remain popular. The irony being that this means we can borrow more. http://www.telegraph.co.uk/finance/comment/liamhalligan/9262086/Broken-banking-system-is-keeping-growth-at-bay.html Again, no mention of trade deficits. Quote Link to comment Share on other sites More sharing options...
jammo Posted May 14, 2012 Share Posted May 14, 2012 What we had was a crisis in the markets now packaged as a crisis of public spending. Austerity is not going to fix anything but feel free to keep on chanting the mantra as the country slowly sinks below the waves. Think about how this happened as well, one whimsical almost overnight decision by Gordon Brown to bail out banks that were flashing up FAIL on their monitors in big red letters. I don't think austerity will cut it. Warfare may well cut it, it is the traditional escape route out of a depression after all. Thanks Flash. Quote Link to comment Share on other sites More sharing options...
sombreroloco Posted May 14, 2012 Share Posted May 14, 2012 Think about how this happened as well, one whimsical almost overnight decision by Gordon Brown to bail out banks that were flashing up FAIL on their monitors in big red letters. I don't think austerity will cut it. Warfare may well cut it, it is the traditional escape route out of a depression after all. Thanks Flash. What if you apply the "too big to fail" to national debt now? Easy peasy! That's what Iceland did and what Greece should do. Suicide banking works both ways. Pity that the tabloid reader will never get it. Quote Link to comment Share on other sites More sharing options...
madpenguin Posted May 15, 2012 Share Posted May 15, 2012 (edited) So that's what they mean when they say we are all in it together. What they mean is, the national debt, and ergo debt interest payment is growing more and more. Our taxes are going toward paying for less and less services (owing to the fact that a growing proportion of it must be going towards debt interest - never mind inflation), therefore each and every one of us is paying for their mis-management of the economy. So we really are all in it together after all. Good to know. Exactly, not just us but Europe and the US too, the US and the UK are just putting off the fateful day, while the Eurozone is provoking revolt in the countries suffering most from austerity cuts, neither are pretty, and if it gets to the stage where UK/US can't borrow anymore what then?, ever increasing debt interest payments can't be sustainable and Governments imposing austerity get voted out The UK government says it was going to cut 6.2bn in 2010/2011, looked at in relation to the debt and the interest involved it's like offering to pay five quid a month on 100,000 debt, it's not even making an effect on the interest let alone getting the outstanding debt down Edited May 15, 2012 by madpenguin Quote Link to comment Share on other sites More sharing options...
mfs1959 Posted May 15, 2012 Share Posted May 15, 2012 (edited) Exactly, not just us but Europe and the US too, the US and the UK are just putting off the fateful day, while the Eurozone is provoking revolt in the countries suffering most from austerity cuts, neither are pretty, and if it gets to the stage where UK/US can't borrow anymore what then?, ever increasing debt interest payments can't be sustainable and Governments imposing austerity get voted out The UK government says it was going to cut 6.2bn in 2010/2011, looked at in relation to the debt and the interest involved it's like offering to pay five quid a month on 100,000 debt, it's not even making an effect on the interest let alone getting the outstanding debt down And really radical solutions, such as setting a year zero budget, are politically impossible. Government continues to do what it did, and just spreads the jam a little thinner. Edited May 15, 2012 by mfs1959 Quote Link to comment Share on other sites More sharing options...
madpenguin Posted May 15, 2012 Share Posted May 15, 2012 (edited) We made these mistakes already - with a lack of respect for debt. We've been making them earnestly for decades and now we've broken the money and broken the banks. There are two options: try austerity or accept that it's too late and press the reset button and face the consequences. Neither is pretty. The idea that we'll borrow and get some growth is nonsense. All our growth for the last 30 years was borrowing and we just maxed out the credit card and moved from the teaser rate to the standard rate. This is going to be very ugly. Myself I think it's looking more and more like the reset button is the only option for pretty much all of the Western economies, don't know how the Chinese and the Arabs would react though As has been pointed out many times before QE is a form of default, your giving back less value than you borrowed Edited May 15, 2012 by madpenguin Quote Link to comment Share on other sites More sharing options...
mfs1959 Posted May 15, 2012 Share Posted May 15, 2012 Myself I think it's looking more and more like the reset button is the only option for pretty much all of the Western economies, don't know how the Chinese and the Arabs would react though They will have little choice but to accept whatever is on offer. Look at Greece and Iceland, they have managed to default on billions. Quote Link to comment Share on other sites More sharing options...
Lepista Posted May 15, 2012 Share Posted May 15, 2012 1) When things were booming, the country was still in the red, we were still borrowing, even though tax receipts were at an all time high. Things were "booming" *only because* we were borrowing. Take away government spending, and we have been in recession for a very, very long time. (Not that I'm making a case for government spending, or borrowing). Quote Link to comment Share on other sites More sharing options...
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