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Some Thoughts On Deficits And Why Gilts Are Doomed

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http://www.theguardian.com/commentisfree/2015/mar/08/selling-off-britain-ownership-crisis-debate

Interesting article

Nor does the story end there. The current account deficit for the third quarter of 2014 – the latest reported – reached 6% of GDP, the highest since records began in 1955. Analysing the figures, the Office of National Statistics observes that one of the principal causes is the deterioration in Britain’s international investment position since 1980. For centuries Britain, courtesy of empire and overseas expansion, enjoyed a phenomenal net surplus of assets; we owned more of the world than foreigners owned us – so that consistently Britain netted a surplus of investment income.

No more. In the third quarter of 2014 the growing net deficit of assets as we sell off the country overseas meant that Britain had a record deficit in its investment income balance of 2.8% of GDP. If these trends continue for another 10 or 15 years the interaction with our growing trading deficit – we import a great deal more than we export – will eventually make the scale of our international debts and income flows abroad insupportable. There will have to be a massive national belt-tightening along with the imposition of controls of capital to stop a runaway sell-off of what will be valueless pounds. The curtain will come down on an era of amazing economic fecklessness.

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Nor does the story end there. The current account deficit for the third quarter of 2014 – the latest reported – reached 6% of GDP, the highest since records began in 1955.

Just to say that for sure there would records for that before 1955.

Maybe they aren't available now (and maybe they are) but that's not the same as saying that records only began then.

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Nor does the story end there. The current account deficit for the third quarter of 2014 – the latest reported – reached 6% of GDP, the highest since records began in 1955.

Just to say that for sure there would be records for that before 1955.

Maybe they aren't available now (and maybe they are) but that's not the same as saying that records only began then.

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Is the Current Account deficit different to the structural one which Osboone bangs on about? Isn't the interest on the national debt is £1bn a week also?

Are we stuffed?

I think the current acct deficit is the trade deficit.

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Just to say that for sure there would be records for that before 1955.

Maybe they aren't available now (and maybe they are) but that's not the same as saying that records only began then.

Yeah but you can be sure that before then there was no current account deficit in fact a huge surplus in goods.

Services have relatively recently and conveniently for the banks run up a considerable surplus, however this is next to impossible to accurately measure and doesn't lie very well with the banks having to be rescued.

Its just a game of bluff, the emperor has no clothes.

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Is the Current Account deficit different to the structural one which Osboone bangs on about? Isn't the interest on the national debt is £1bn a week also?

Are we stuffed?

Current account is the gap between what the UK imports and exports.

Its really big and its been negative for pretty much 30 years on - something do with financial de-reg, which increases debt which is spent on BMWs. The germans get, err, Marmite. The difference is funded by creditors abroad.

The structural deficit is the gap between what we spend and what we tax, explained by being in recession. Frankly the structural deficit is just cluthcing at straws - you oew money then you owe money.

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I can't be bothered reading him. I assume he's sneaked in there that we would be dramatically better off if we were using the Euro. He usually does.

Edited by bogbrush

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It amazes me how economists can make simple things complex, winding in a narrative which sounds both important and feasible.

There are people and companies. It really doesn't matter where the latter has its HQ... Unless you view it as a tax cow, ofc.

This all seems so obsolete, so old fashioned. Strange really.

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Apart from the current account deficit which is the real but not most pressing problem.

The OBR has for 5 years assumed that half the fiscal deficit will magically disappear through miracle growth, this unfortunately hasn't happened leading to the level of cuts required to keep borrowing under control being twice as large as forecast by the OBR.

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