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Why Isn't The Ballooning National Debt Seen As A Osborne's Massive Failure?


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I do not need it simplifying thanks

I do not have any faith in the GDP figures, a big part of which have been manipulated by high house prices and as well accelerating public debt private debt as well.

If National debt had levelled out then I would have been far more impressed with the today's deficit. Just takes one small recession now and the deficit will be back into double figures.

GDP measures the performance of the economy against the standards of the people who pay economists.

It's no surprise that a debt fuelled rentier economy like ours will score highly on that scale. It was designed by rentiers and moneylenders.

It's no more relevant than tractor production numbers, the number of gold medals won at the Olympics, or the number of nuclear warheads in a country's aresenal.

GDP isn't a statistic; it is ideological.

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It's actually pretty straight forward.

The deficit is how much more the government spend each year on day to day expenditure - services, benefits etc, than they take in taxes.

The debt is the total of all the previous deficits, PLUS capital expenditure. If they borrow money to build a hospital, the total cost is added to the debt, but only the interest costs are included in the deficit.

If you're sneaky, and what a new hospital, but also want to keep the national debt within the EU's imposed limits, you do a PPI deal. It costs more than interest servicing, but hides the overall financial obligation, because it's not actually a debt.

Worth noting that under the current system, you have to keep growing the debt, simply to create the new money to pay the interest on the debt.

That's why austerity isn't working. By trying to reduce the deficit, and thereby the debt, through reduced government spending, they are reducing the money supply. ( since paying down debt destroys the money created when the debt was issued. )

And if you reduce the money supply, you induce a recession since people have less to spend... Unless you can persuade them to take on more debt themselves, thus creating the new money needed to maintain the money supply ( and pay the interest on it).

So debt based asset bubbles, student loans, PPI deals ( the "partner" still borrows the money, it's just that the debt's on their books instead of the government ).. you name it.. anything to keep the borrowing going. The great Ponzi.

It's becoming apparent that if you reduce government debt, you increase private debt and kill the economy. and if you do that, tax receipts fall, so if you want to provide the same services the government has to borrow more anyway.

The only solution is to change the way money is created, Until then, we need to end austerity to start increasing the deficit, getting the debt back on the government books, so as to make a start on reducing personal debt, so people can start spending again and the economy can recover.

Thanks - useful post. Head and shoulders above most.

What of the bank bailouts ? Will there be some magical moment they are flushed out the system ?

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The deficit is how much more the government spend each year on day to day expenditure - services, benefits etc, than they take in taxes.

.......................

Yes, and the economy we now have in order to increase GDP which gives us the jobs and salaries which can then be taxed is all sitting on quicksand. Our economy is an illusionary one, and by the end of this year I believe will go into recession or be close to it which will decrease tax receipts, I even think there is a good chance taxes might need to be raised.

The one simple fact that we have near negative interest rates tells me that the economy we have now is over rated.

I personally think recession (a big one) is baked in and Brexit will be the perfect scapegoat. If you look at GNP and GDP per capita the figures are disticnctly depressing to put it mildly which is why they are never referred to.

I have got to the point where all discretionary spending after everday essentials such as housing, transport, utilities and food is effectively taxed at the higher rate this now affects my spending habits as I have no intention of killing myself by working till I hit whatever nebulous target the government decides. When you realise that the nice stuff effectively costs something like 168% more in actual work to cover the extra tax you soon learn to do without.

I also view the National Debt as entailing people working harder and longer for less so the government can take more over your lifetime.

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I do not need it simplifying thanks

Ok but let me make it even simpler. The UK is like Greece but much much bigger. The debt is never going to be paid back. The UK economy was fatally hit below the water line in 2008 (and it wasn't particularly seaworthy before). At the moment you are on the deck, maybe still enjoying a cocktail, wondering why the crew are rushing about over a bit of ice. Osborne is the purser, he can arrange the deck chairs, fetch me a rug, maybe get the band to play on, but baring a miracle the boat is going down and it will take a lot of the passengers with it.

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Greece and Japan: a tale of two writedowns. The vanguard of a global debt jubilee?

https://www.socialeurope.eu/2016/06/tale-two-debt-write-downs/

At the end of 2015, Greece’s public debt was 176% of GDP, while Japan’s debt ratio was 248%. Neither government will ever repay all they owe. Write-offs and monetization are inevitable, putting both countries in a sort of global vanguard. With total public and private debt worldwide at 215% of world GDP and rising, the tools on which Greece and Japan depend will almost certainly be applied elsewhere as well.

In both Greece and Japan, excessive debts will be reduced by means previously regarded as unthinkable. It would have been far better if debts had never been allowed to grow to excess, if Greece had not joined the eurozone on fraudulent terms, and if Japan had deployed sufficiently aggressive policy to stimulate growth and inflation 20 years ago. Throughout the world, radically different policies are needed to enable economies to grow without the excessive private debt creation that occurred before 2008. But having allowed excessive debt to mount, sensible policy design must start from the recognition that many debts, both public and private, simply cannot be repaid.

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Really not not sure what point you are trying to make or taking the p**s,

The endgame is that Britain will default. What we don't know is if that default will be money owed to the international markets or your savings and pension. Even if it is money owed to the markets it will still be your pension.

> Unless that is we drastically reduce public borrowing to a point where people will think the austerity measures post 2007 were wonderful

Going back to the Titanic, that would be like turning off the pumps in the hope you could use the saved fuel to sail to shore.

Edited by davidg
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The endgame is that Britain will default. What we don't know is if that default will be money owed to the international markets or your savings and pension. Even if it is money owed to the markets it will still be your pension.

> Unless that is we drastically reduce public borrowing to a point where people will think the austerity measures post 2007 were wonderful

Going back to the Titanic, that would be like turning off the pumps in the hope you could use the saved fuel to sail to shore.

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"The endgame is that Britain will default"

Agree with this but the default will be subtle and will probably take the form of confiscation of financial wealth to avoid a 'hard default' I consider pensions to be especially vulnerable as they are big and readily accessible

Reducing the life-time allowance to £1m before a putative tax is applied is a clever move because no one has sympathy for people with such a big pension, however this amount of cash only buys you an income of 45k p.a and no doubt the life time allowance is only going in one direction and will eventually apply to the average man

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"The endgame is that Britain will default"

Agree with this but the default will be subtle and will probably take the form of confiscation of financial wealth to avoid a 'hard default' I consider pensions to be especially vulnerable as they are big and readily accessible

Reducing the life-time allowance to £1m before a putative tax is applied is a clever move because no one has sympathy for people with such a big pension, however this amount of cash only buys you an income of 45k p.a and no doubt the life time allowance is only going in one direction and will eventually apply to the average man

Private pensions are small beer.

The biggest default, to help manage cash flow, will have to be public sector pensions.

Theyre going to have to bump up the age to 70+ and reduce the percentage paid out.

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When productivity can't keep up with debt required to keep things growing that is what you get ...... exponential growth of debt to help keep things going, extra debt or new people with money or able to take on debt to buy necessary assets required to live or keep people living to work to repay the debt they need to live.....

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For those who say "oh, you know, he inherited a big mess" - yeah, we know. BUT he did say he would balance the books by 2015/2016. He NOPED that one in a big way. Now he's talking about 2020. FFS - do you believe him? Still borrowing £8Bn to £10Bn per MONTH. Never mind, look the other way.

Absolutely. Osborne doesn't live up to the traditional Conservative politician. In 2011 or 2012, he introduced all that 'Help To Buy' b0llocks which seems like a continuation of the spendthrift NuLabour. <_<

Nevertheless, let's give him some credit. He has made some savings by squeezing the finances of the poor and working classes.

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France has been a basket case because, under the Socialists, they decided to do real austerity by hiking taxes which caused the tax base to collapse - the rich went abroad, firms stopped hiring and everyone else stopped spending.

You don't get austerity by raising taxes. You get austerity by cutting spending.

France is a basket case because it's French, not because of fake 'austerity'.

If the Tories had been serious, they'd have slashed spending right after the election, and the economy might have recovered by now. But the Lib Dims would never have let that happen. Now it's far too late.

Edited by MarkG
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Thanks - useful post. Head and shoulders above most.

What of the bank bailouts ? Will there be some magical moment they are flushed out the system ?

At some point I think there has to be, particularly for the Eurozone, but how and when is hard to predict. It's a political issue really.

Just speculating ( I'm a trader, not an economist ) but since we're outside the Euro, one other option for us may be a staggered phasing out of the debt based money.

We could do this by slowly increasing the amount the government borrows from the BoE rather than the bond markets. The interest on BoE loans goes to the Treasury as revenue so it amounts to debt free money ( the state owes money to itself, and pays the interest to itself ).

It's not something you'd want to do with day-to-day expenditure.. it would be too tempting for a government to spend a little more to buy votes, and end up expanding the money supply too much, causing inflation. Do it with capital projects though, and you're really just creating money in the same way we do already, but cutting out the bankers.

Only a few economies.. the US, Japan, the UK and the Germany have the reputation for stability to pull this off. Basically the 4 places bond-holders currently park their money. The US probably can't do it as it would seem too socialist. Germany can't because it's in the Euro. Japan maybe could, but in practice we'd probably be the first, particularly if we leave. Corbyn's National Investment Bank is basically this idea, so it could be on the cards if we Brexit and labour win the next election.

Like I say, just speculation.. there may well be holes in this cunning plan :)

Edited by ManVsRecession
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Like I say, just speculation.. there may well be holes in this cunning plan :)

Turner touches on related ideas in Between and the Devil but I like your discussion of why the UK could pull it off and why 'competitors' in the sovereign debt issuance game might not be inclined to try, thus making it a better gamble for the UK. IIRC Turner argues that it's too late for such a move, as in too late into the present crisis, but maybe a decent recession or some other vector delivering blind panic might put it back on the menu?

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Osborne gets away with it because he has spent the last 7 years repeatedly saying:

1. He has cut up the credit card.

2. Paid back the deficit.

These are both meaningless.

There is no credit card and in any case the debt is getting bigger.

And you can't pay back a deficit.

However, I have never heard him challenged when making these statements.

I am also dismayed at the number of people who tell me what a great Chancellor he is and refuse to believe me when I tell them the National debt is growing at an alarming rate.

All politicians know that if you repeat something often enough it becomes truth.

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Osborne gets away with it because he has spent the last 7 years repeatedly saying:

1. He has cut up the credit card.

2. Paid back the deficit.

These are both meaningless.

There is no credit card and in any case the debt is getting bigger.

And you can't pay back a deficit.

However, I have never heard him challenged when making these statements.

I am also dismayed at the number of people who tell me what a great Chancellor he is and refuse to believe me when I tell them the National debt is growing at an alarming rate.

All politicians know that if you repeat something often enough it becomes truth.

George-Osborne-627678.jpg

He has lost weight also - so he personally has set a challenge to himself and achieved it.

To the world, his image of this achievement is psychologically more important than his actual progress at No. 11

---

If you asked 100 people, if two spaceships got into a battle, which would win? The "Intergalactic Solar Destroyer", versus the "Moon Defender" most people would probably vote the former just because of the name, without knowing anything more about the weapons, crew training, speed, etc.

Edited by 200p
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To all of those (essentially) defending Osborne (by shifting the blame entirely to Brown/Darling), why did Osborne promise to have a surplus by 2015/2016? Either that's a really egregious lie, OR he badly badly messed up his plans. Again, he's given a pass on that one. When we get to 2020 (when he promises the new surplus target), and Osborne is still the Chancellor (of course), and we still have a deficit, I can't wait for the deafening silence again.

edit: think about how a Chancellor moves back a very significant target FIVE WHOLE YEARS. Meditate on that. Let that one sink in.

Edited by canbuywontbuy
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To all of those (essentially) defending Osborne (by shifting the blame entirely to Brown/Darling), why did Osborne promise to have a surplus by 2015/2016? Either that's a really egregious lie, OR he badly badly messed up his plans. Again, he's given a pass on that one. When we get to 2020 (when he promises the new surplus target), and Osborne is still the Chancellor (of course), and we still have a deficit, I can't wait for the deafening silence again.

edit: think about how a Chancellor moves back a very significant target FIVE WHOLE YEARS. Meditate on that. Let that one sink in.

I think Mr Austerity will bring forward his spending plans this time though. The housing bubble is clearly sucking wind and threatening to tip the UK back into recession again. He won't want that. Assuming remain win the referendum then I think he'll publicly abandon the surplus target this Autumn.

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Government debt doesn't matter until the moment it does. Currently government debt doesn't matter everyone can safely ignore it.

Obviously it will matter at which point everyone will ask we got into such a state an nothing was done.

True.

In 2005 Greece was able to fund its debt at a spread of 1% over Bunds.

Come 2010, what little debt Greek could issue was priced with a spread of ~14% over Bunds.

I still think QE is aprocess by which the currency will be debased. Hooray! All our debts are gone.

Only to be replaced by only beingable to borrow in another currency or someform of basket. Boo Hiss!!!

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If you asked 100 people, if two spaceships got into a battle, which would win? The "Intergalactic Solar Destroyer", versus the "Moon Defender" most people would probably vote the former just because of the name, without knowing anything more about the weapons, crew training, speed, etc.

:lol:

Why would an Intergalactic Solar Destroyer be interested in a basic Moon, and are moon minerals worth keeping a patrolling Moon Defender on standby to defend?

Still the way you put it is fun. Your thinking there reminds me a bit of this. 1m:11secs YouTube -

(40 seconds) (NSFW - some bad language)

He looked hurt. 'But they're called the Humanists!'

'That's just their name, Zakalwe.'

'Names are important,' he said, apparently serious.

'It's still just what they call themselves; it doesn't make them the good guys.'

'They also,' Skaffen-Amtiskaw said, 'refuse to acknowledge machine

sentience fully; they exploit proto-conscious computers and claim only

human subjective experience has any intrinsic value; carbon fascists.'

-Use of Weapons

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Because most of the public are troughing from the created debt......welfare recipients, the retired, the public sector. Who is going to kill the goose that lays the golden egg and who cares about who pays when the music stops....jam today.

Certainly there is a lot of appeasement going on and a lot of propaganda from the left that leads to an Austerity programme from the right that is actually about running a 10% deficit forever.

Edited by crashmonitor
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  • 439 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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