Government Borrowing More Than Last Year

[durhamborn]

http://www.dailymail.co.uk/money/markets/article-2586351/National-debt-keeps-going-UK-sinks-deeper-red.html

So much for spending cuts.As we all know on here the government has given up on sorting out the state finances and only cares about pushing house prices up to try to get re-elected.

It makes you wonder on the new pension reform.Is it because they know there is going to be a default in the next parliament and they want to be able to move their cash out of sterling and keep out of gilts?.

[zugzwang]

http://www.dailymail...deeper-red.html

So much for spending cuts.As we all know on here the government has given up on sorting out the state finances and only cares about pushing house prices up to try to get re-elected.

It makes you wonder on the new pension reform.Is it because they know there is going to be a default in the next parliament and they want to be able to move their cash out of sterling and keep out of gilts?.

I doubt if any of the clowns at the Treasury or the BoE have any more idea what's coming than they did in 2007. They still affect to believe in recovery, at least in public. What they do know, however, is that the UK govt still needs to keep borrowing and monetising on an unprecedented scale to prevent the economy falling into a second deflationary depression. At some point - in the absence of recovery - the accumulated debt will become unserviceable and the country will be faced with a choice of default or hyperinflate. Gold, silver and probably USD is what I'll be holding at that point. Another five years? Maybe, if they're lucky.

[winkie]

So what is the governments plan B? That is any government, they are all basicly the same when it comes to important structural major policies.... The the things that matter now and in the future.....or are they all small fish swimming against a strong current in a big pond?

[moesasji]

http://www.dailymail.co.uk/money/markets/article-2586351/National-debt-keeps-going-UK-sinks-deeper-red.html

So much for spending cuts.As we all know on here the government has given up on sorting out the state finances and only cares about pushing house prices up to try to get re-elected.

It makes you wonder on the new pension reform.Is it because they know there is going to be a default in the next parliament and they want to be able to move their cash out of sterling and keep out of gilts?.

Why are you surprised....the government is running a deficit and it is the deficit that they try to bring down with those spending cuts not the debt. And a deficit tells you the government spends more than it takes in. So by definition the government will borrow more every single year. Moreover this deficit is in fact a bigger fraction of GDP than a country as Italy had when they got into serious trouble.

ps) The above also shows that every single politician that states the are bringing down the debt is talking utter b#llocks

[winkie]

Why are you surprised....the government is running a deficit and it is the deficit that they try to bring down with those spending cuts not the debt. And a deficit tells you the government spends more than it takes in. So by definition the government will borrow more every single year. Moreover this deficit is in fact a bigger fraction of GDP than a country as Italy had when they got into serious trouble.

ps) The above also shows that every single politician that states the are bringing down the debt is talking utter b#llocks

Why they lie......are they in denial?

[Guest spp]

Unless interest rates rise the overall DEBT doesn't seem to matter. The west is manipulating interest rates...so are they not in total control?

So many countries are in a mess so the show must go on (they are in bed together).

Martin Armstrong has been pointing out a major downturn in the final quarter of 2015. Before anyone goes off calling him a 'gold-bug', he actually called the pullback.

But the whole system is so manipulated...Will there ever be a real shakeup?

[interestrateripoff]

Borrowing more and GDP growing more, I'm sure there's no connection.

[Bloo Loo]

Unless interest rates rise the overall DEBT doesn't seem to matter. The west is manipulating interest rates...so are they not in total control?

So many countries are in a mess so the show must go on (they are in bed together).

Martin Armstrong has been pointing out a major downturn in the final quarter of 2015. Before anyone goes off calling him a 'gold-bug', he actually called the pullback.

But the whole system is so manipulated...Will there ever be a real shakeup?

you can force water uphill with a plank...but it will all roll off back to level..same with money...it is in balance, and an imbalance will correct.

[davidg]

http://www.dailymail.co.uk/money/markets/article-2586351/National-debt-keeps-going-UK-sinks-deeper-red.html

So much for spending cuts.As we all know on here the government has given up on sorting out the state finances and only cares about pushing house prices up to try to get re-elected.

Until the deficit is zero or less then debt will increase year on year. However if you cut too deeply it can have the reverse effect of what you want to achieve. The original Tory deficit reduction plan was to eliminate the deficit (but not the debt) by 2015, I believe it is now planned for 2018/19. Only then will the debt be reduced; to get the debt to a manageable level will take to 2040 and they'll need to do something about pension commitments before then.

I don't think any government has reduced debt by spending cuts, it has always been done through GDP expansion bringing in more tax. So Obourne (and Darling's) plan is probably correct within traditional government spending constraints.

There are two questions

i. should they have reduced spending (ie below inflation increases) early in the parliament?

ii. had Britain already gone over the event horizon in 2008? - that is the 2019 horizon is unachievable and we will tip back into recession in the next parliament?

[wonderpup]

but but Dave said we are 'paying down our debt' and he is running the country.

The tories have wasted four years, their legacy is hundreds of thousands of people on zero hours contracts, demonisation of the unemployed, rampant HPI, GDP growth via imputed rent and debt-based spending and they haven't even eliminated the deficit which was their main aim.

But in help to buy they have succeeded in creating the most radical socialist extension of the state since the creation of Tax credits- not only will it be 'cradle to grave' welfare- the state will now forever be committed to ensuring that you can afford to buy a house as well.

The fact that it's a Tory led government who are responsible makes it even more ridiculous, and confirms-if any confirmation were needed- that any principles political parties claim to believe in (free markets in this case) are totally expendable.

So while they claim to be 'tough' on welfare for one group- in the case of the bedroom tax- in reality they have created a massive extension of welfare in the form of interest free loans for home buyers- who can use that benefit to purchase a house with a spare bedroom or two and no questions asked.

Maybe it would just be more honest and simple if a large lump sum were set aside by any incoming government under a budget called 'Election year bribes'- at least that way we might get less distortion of the economy as governments approach their sell by dates- they could just fund a mass tax giveaway in year five directly from that bribe the electorate budget.

[Bloo Loo]

Until the deficit is zero or less then debt will increase year on year. However if you cut too deeply it can have the reverse effect of what you want to achieve. The original Tory deficit reduction plan was to eliminate the deficit (but not the debt) by 2015, I believe it is now planned for 2018/19. Only then will the debt be reduced; to get the debt to a manageable level will take to 2040 and they'll need to do something about pension commitments before then.

I don't think any government has reduced debt by spending cuts, it has always been done through GDP expansion bringing in more tax. So Obourne (and Darling's) plan is probably correct within traditional government spending constraints.

There are two questions

i. should they have reduced spending (ie below inflation increases) early in the parliament?

ii. had Britain already gone over the event horizon in 2008? - that is the 2019 horizon is unachievable and we will tip back into recession in the next parliament?

I beleive in the early 1920s recession, the US Government went on real Austerity ( a balanced budget) and let a few banks fail...that recession ended quickly and the economy rebounded like never before in history...until 1929 when all the overborrowing returned.

[zugzwang]

I beleive in the early 1920s recession, the US Government went on real Austerity ( a balanced budget) and let a few banks fail...that recession ended quickly and the economy rebounded like never before in history...until 1929 when all the overborrowing returned.

Aaron Krowne's estimable MLI site is currently quoting 388 US bank and mortgage lending failures since late 2006.

http://ml-implode.com/fulllist.html#lists

[davidg]

I beleive in the early 1920s recession, the US Government went on real Austerity ( a balanced budget) and let a few banks fail...that recession ended quickly and the economy rebounded like never before in history...until 1929 when all the overborrowing returned.

I think the time to have acted was 2008... letting RBS and the Crock fail, by the time the Tories took over it was a bit late.

[frederico]

The Tories are doing a spiffing job of changing bugger all.

[Bloo Loo]

Aaron Krowne's estimable MLI site is currently quoting 388 US bank and mortgage lending failures since late 2006.

http://ml-implode.co...list.html#lists

just had a quick scan of that list, and quite a few are just departments of big TBTF Banks...there were HSBC divisions, Barclays and others...not really bank failures at all in the sense that occured in the 1920s.

Others are mortgage "warehouses"...so again, not banks in the traditional sense...ie, they were just movers of the "wall of money" generated by the TBTFs.

Although, yes, there are smaller US banks in there.

[Executive Sadman]

I beleive in the early 1920s recession, the US Government went on real Austerity ( a balanced budget) and let a few banks fail...that recession ended quickly and the economy rebounded like never before in history...until 1929 when all the overborrowing returned.

Krugman said 1920/21 was 'different' because there it was an inflationary bubble that needed popping....I guess the same could be said to a lesser extent in the 1980/81 induced recession...people deemed inflation a bigger problem than unemployment and elected Thatcher and Reagan to tackle the former...and even then, with roaring inflation, it was still very unpopular for a few years.

Myself, I dont think there is any difference. Its simply not apparent to the public because we are at a different stage in the debt cycle.

ie, the public simply dont see the inflation as a problem because they have been conditioned to think 2/3/4% is OK. They were'nt conditioned to think 15% was OK back in the 70s, so didnt tolerate it. However, nominal and real inflation are two different things. Inflation may have been 15% back then, but wage inflation was also >10%. Now we have 4% price inflation and 2% wage inflation (2% real inflation) We're losing ground at a similar rate now as in the depths of the 70s stagflation.

My view is simple. If price inflation is higher than wage inflation, and productivity is still positive, then there is too much credit in the system. All booms/bubbles are credit bubbles, regardless of whether nominal inflation is 2% or 20%. Bankster Politicians and their 'intellectual' enablers like Krugman simply invent bubble types to allow them to continue their theft.

[Sour Mash]

But the whole system is so manipulated...Will there ever be a real shakeup?

Yes - but only when the system breaks.

[zugzwang]

My view is simple. If price inflation is higher than wage inflation, and productivity is still positive, then there is too much credit in the system. All booms/bubbles are credit bubbles, regardless of whether nominal inflation is 2% or 20%. Bankster Politicians and their 'intellectual' enablers like Krugman simply invent bubble types to allow them to continue their theft.

What David Stockman calls 'golden constant' of leverage was over thrown by the New Economics of the 1960s. It's been downhill ever since and there's no reason to believe that things are going to get better now. Quite the opposite, in fact.

http://davidstockmanscontracorner.com/2014/03/22/fisher-outs-bubbles-ben-qe-was-a-massive-intended-gift-to-the-1/

During the century before 1970, the ratio of total credit market debt—household, business, financial and government—- to national income was steady at about 1.5X. And with the exception of the early 1930s crash of the denominator (national income or GDP), the nation's 'leverage ratio" oscillated in a narrow band around that central tendency during periods of booms and bust, war and peace, and mostly during the times of growing prosperity in between. Call it the golden constant and it worked. As late as 1981, the GDP was $3 trillion and credit market debt about $5 trillion–still reflecting the golden constant of national leverage. Then we had what can only be described as a rolling national LBO under which every sector of the economy totally used up it borrowing capacity and in the process finally ran up against the hard stop of "peak debt".

Specifically, the "bubble blind" PhD's who ran the Fed could not see that by 2007 the US economy was consuming $7 of new credit for each dollar of added GDP. In fact, scour the fabled transcripts of the FOMC meetings and there is hardly an acknowledgement that credit market debt that year expanded by $4.5 trillion and that money GDP grew by the niggardly sum of $700 billion. Did this ship of fools not understand the laws of compound arithmetic? Or that at 2007s rate of up-take, credit market debt outstanding would grow from $50 trillion to the absurd level of $500 trillion within only a few decades!

More importantly, did they not understand that the Keynesian game of borrowing extra GDP today at the expense of deflationary debt burdens tomorrow was nearing its limit? Self-evidently, they did not. Washington's so-called rescue of the US economy after the financial crisis consisted of nothing more than a central bank enabled drawdown of the last available balance sheet—that of Uncle Sam. So here we are today with credit market debt of $59 trillion on $17 trillion of money GDP, meaning that our rolling national LBO has reached its end game. At a national leverage ratio of 3.5X the US economy lumbers under two extra turns of debt relative to the stable, sustainable and healthy 1.5X ratio that prevailed before the Keynesian conjurer's trick became national policy.

Stated differently, at the golden constant of 1.5 turns of debt on income, credit market debt today would total about $27 trillion. And the massive incremental debt burden of $32 trillion that we actually carry is the reason that unreconstructed Keynesians like Larry Summers spend most days sucking their thumbs trying to figure out why the GDP is not attaining "escape velocity"—which is to say, why the Keynesian debt trick is no longer working.

Today household debt to wage and salary income has dropped to about 180%, which is still far above healthy historical levels, and is sustainable only due to the Fed's absurd repression of interest rates—particularly for mortgage debt. Interest rates on the latter would easily be 300-400 basis points higher in an honest market without taxpayers subsidies from Fannie Mae and interest rate subsidies that the Fed extracts from the nations' hapless liquid savers earning their 40 basis points.

Indeed, the only credit expansion happening in the household sector after nearly seven years of frantic money printing at the Fed—-which has taken its balance sheet from $900 billion to $4.2 trillion and still rising—is an explosion of NINJA loans to students and sub-prime loans to buyers of used cars and the down-market offerings of born again GM and Chrysler. Neither of these utterly artificial credit boomlets will last much longer—that's a certainty.

On the business side, there was about $3 trillion of outstanding credit market debt when Greenspan got his bubble finance scheme up and running. By the time of the Lehman bankruptcy it was up to $11 trillion and spinning its wheels. That is to say, nearly all of the up-take at the pre-crash peak was being used to fund LBOs, leveraged stock buybacks and M&A deals mainly financed with borrowed cash. Stated differently, the business sector had been transformed from a credit user that financed higher growth of productive assets to one that had become merely a transmission belt for financial engineering and the levitation of stock prices on borrowed money.

Today household debt to wage and salary income has dropped to about 180%, which is still far above healthy historical levels, and is sustainable only due to the Fed's absurd repression of interest rates—particularly for mortgage debt. Interest rates on the latter would easily be 300-400 basis points higher in an honest market without taxpayers subsidies from Fannie Mae and interest rate subsidies that the Fed extracts from the nations' hapless liquid savers earning their 40 basis points.

Indeed, the only credit expansion happening in the household sector after nearly seven years of frantic money printing at the Fed—-which has taken its balance sheet from $900 billion to $4.2 trillion and still rising—is an explosion of NINJA loans to students and sub-prime loans to buyers of used cars and the down-market offerings of born again GM and Chrysler. Neither of these utterly artificial credit boomlets will last much longer—that's a certainty.

On the business side, there was about $3 trillion of outstanding credit market debt when Greenspan got his bubble finance scheme up and running. By the time of the Lehman bankruptcy it was up to $11 trillion and spinning its wheels. That is to say, nearly all of the up-take at the pre-crash peak was being used to fund LBOs, leveraged stock buybacks and M&A deals mainly financed with borrowed cash. Stated differently, the business sector had been transformed from a credit user that financed higher growth of productive assets to one that had become merely a transmission belt for financial engineering and the levitation of stock prices on borrowed money.

Today credit market debt outstanding in the business sector exceeds $13.5 trillion, but virtually all of the incremental gain of $2.5 trillion has gone into leveraged financial engineering. The evidence for that is everywhere in plain sight. We have now returned 2007 bubble conditions— including peak rates of junk bond issuance, massive share buy-backs, rampant leveraged recaps based on so-called covenant lite "senior" loans being scooped up by agents of toxic debt called CLOs. Even the Wall Street meth labs are back—slicing and dicing rental streams from America's new hedge fund and private equity landlords who have swarmed into the single family home business in Scottsdale AZ and Las Vegas, among dozens of other Housing Bubble 2.0 markets.

All of that financial engineering does not cause real economic growth or an expansion in the economy's base of productive assets. The evidence screams out loud. After all of the Fed's mad money printing, real investment in plant and equipment during Q4 2013 was still $100 billion or 8% lower than it was at the top of the last cycle in late 2007. The Fed is not stimulating economic growth at all. It is just enabling massive rent extractions from the business sector by the fast money gamblers on Wall Street who know how to time the bubbles and rips that result from LBO takeouts and the leveraged share buyback campaigns, and to grab the financial joy which gushes during those strategic minutes before the announcement of pointless M&A deals.

Even the government sector users—federal, state and local— of the credit expansion channel are tapped out objectively. Total credit market debt in the public sector is now nearing 100 percent of GDP, and is sustainable only owing to the Fed's interest rate repression. And that is the word for it because it is inconceivable that in a world of 2% "official" inflation and income taxes on top at 40% that there would be many free market takers for Uncle Sam's two-year notes now yielding the princely sum of 40 basis points.

So on the off-chance that monetary unicorns do not exist after all, and that interest rates will at some point normalize, the interest carry burden on taxpayer debt at 100 percent of GDP will soar. It's arithmetic! And then the public sector user of the credit channel will be officially done, too. Say like Detroit.

[zugzwang]

Another month, another Osborne blow-out. Totally unexpected, of course.

http://uk.reuters.com/article/2014/07/22/uk-britain-borrowing-idUKKBN0FR0R820140722

Britain's public finances showed a bigger than expected deficit in June, continuing a weak start to the tax year that leaves finance minister George Osborne with a lot of catching up to do to meet his fiscal goals.

The latest figures show the government has so far failed to reduce public borrowing during the first three months of the 2014/15 fiscal year, with less than a year to go before a national election.

The public sector finances, excluding financial sector interventions, showed a deficit of £11.368bn in June, the Office for National Statistics said on Tuesday.This is up from £7.594bn in June 2013 and well above analyst forecasts of a deficit of £10.65bn.

Stripping out the effect of cash transfers from the Bank of England, the 2014/15 deficit to date was £36.1bn, 7.3% higher than at the same point a year ago. Britain's government is aiming to get the deficit down to 5.5% of gross domestic product in the 2014/15 fiscal year, from 6.5% of GDP in 2013/14.

The ONS said that some factors meant that trends in borrowing in the first three months of this tax year might not be representative of the year as a whole. The first three months of 2013 saw higher than usual income tax payments, due to tax changes, and there were also receipts from a Swiss tax avoidance deal. Income tax in the first three months of this tax year was 3.5 percent lower than in the first three months of the 2013/14 tax year.

Payments of grants to local authorities also followed a different pattern, an ONS official said.

Edited July 22, 2014 by zugzwang

[The Knimbies who say No]

Another month, another Osborne blow-out. Totally unexpected, of course.

http://uk.reuters.com/article/2014/07/22/uk-britain-borrowing-idUKKBN0FR0R820140722

I thought Bobby C at the OBR said it was all ok just yesterday? Oh well, another pot of Tippex for the spend/tax/deficit/growth charts won't hurt anyone.

[1929crash]

Another month, another Osborne blow-out. Totally unexpected, of course.

http://uk.reuters.com/article/2014/07/22/uk-britain-borrowing-idUKKBN0FR0R820140722

A lot of suffering for an unrealistic economic policy.

[interestrateripoff]

We clearly need to borrow and spend more to close this deficit gap and grow the economy.

Being a govt adviser is easy can I have my £200k fee now please.

[TheCountOfNowhere]

We clearly need to borrow and spend more to close this deficit gap and grow the economy.

Being a govt adviser is easy can I have my £200k fee now please.

You are ed balls and i claim my ten pounds.

[Oliver Sutton]

the 2014/15 deficit to date was £36.1bn, 7.3% higher than at the same point a year ago

This when the UK has the fastest "growing" economy. What happens when the inevetiable slow-down starts.

And they think they're going to clear the deficit by 2010