Saturday, July 3, 2010

UK Debt

Servicing our debt is tough now, but it's only going to get tougher

If the UK government sticks with the current austerity plans, that might already lead to strikes and so on, and keeps doing that for the next 30 years (past my working life and yours probably), our national debt will still hit 300pc by 2040. The article points out that the deficit is the rate of debt increase, not debt, and that the liabilities of the UK government are understated, and are due to dramatically increase as the population ages. Not a good message because we are trying to cut back but the damage is done now, so... I could have an around 150/month pension plan matched by where I work, but I am not so sure this is going to be worth it. I have my doubts that I will even get my 150 a month back, let alone the 300 combined.

Posted by stillthinking @ 10:44 PM (2522 views)
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14 thoughts on “UK Debt

  • the number cruncher says:

    This article fails to recognise the real cause of our deficit and why it was brought about. It is not because of public spending but our banking system. Now the rent seekers have spent all the governments money they need to rob our public services, pensions, schools and NHS to fund their insatiable greed, to keep the up the spending power of their capital.

    One of the comments to the article sums the the moral bankruptcy of its author far better than I can:

    davidgoldsby:
    Liam, the man who couldn’t see the 2008 crash coming until he was through the windscreen, remains a tireless advocate of the economic orthodoxy that caused it, and is now sending it into a severe second leg, anticipated by the markets though only just beginning to be felt in the economy at large.

    From the moment people who think like Liam again started to find ascendancy in policy circles, a couple of months back, fear has reasserted itself. With due cause, because in these ultra fragile economic circumstances orthodoxy will equate with liquidationism.

    The liquidationists have one economic tenet; that the relative purchasing power of capital must be maintained no matter how many lives they throw on to the scrapheap in the process.

    It was people like Liam who gave us, ‘independent central banks with low inflation targets create sustainable growth with no more boom and bust’. They were wrong on that and they are wrong on everything else. Useful fools for the vested interests in their determination to maintain usury at all costs, or candidates for the Good Housekeeping prize for budget masochism and blind virtue.

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  • letthemfall says:

    Impossible to take anything LH writes seriously. His articles always amount to partisan bluster. Note how he claims the UK debt situation is so bad it will take many years of austerity to even begin to deal with it, whereas Ireland, truly in a bad situation, is already on the up. Doesn’t make sense.

    LH lives in a curious bubble in which he sees the economic world through the reflections of a banker’s plate-glass window. So people earning £20k must endure a pay freeze while the banking world, primarily responsible for the mess, see their colossal incomes grow even more colossal. Where’s the sense in that? Big Brother has arrived, and the future is the boot of the rich stamping on the faces of the rest.

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  • montesquieu says:

    LH may be talking out of his ar*se, but the comments on this are quite interesting and thought provoking.

    I spent the other evening in a fascinating conversation with a young masters student from mainland China, currently studying in Sweden (I met her in Nanjing and she stayed with us last week on her first trip to the UK).

    I’ve been maintaining for a long time that, while I believe China’s rise to replace America as the top world power is a given, there will be inevitable economic mishaps along the way – in economics nothing happens in a straight line. But I also expressed fears that this could cause social and political upheaval, as economic changes. She maintains that this won’t happen as despite the remaining, considerable gaps between rich and poor, there is simply no appetite for this.

    Mainly due to the depredations of the cultural revolution – her parents are old enough to have lived through this and she is frank that, among other things, the CR has impacted hugely on the quality of teaching staff in universities, with many senior people being party apparatchiks from the 70s, rather than talented academics – Chinese of any age have zero desire for another convulsion, let alone a revolution. In any case, even people disturbed by inequalities (which aren’t hard to find in China) generally accept the CP’s view that communial rights are more important than individual ones, as a better reflection that western, enlightenment driven values that drive things like Human Rights legislation.

    Anyway … it occurred to me … what about coming drastic economic and social change HERE? With such extremes of inequality, are we likely to see a resurgence of proper socialism (although the ‘opponent’ is much harder today to mobilise against than mine bosses)? fascism? Or something new?

    The Tea Party phenomenon won’t happen here are the state’s client base here is much bigger than in the US, outnumbering by far the few (overwhelmingly ‘haves’) who want a smaller state. My sense is that if there are any nascent insurrectionists out there, they are most likely from the left. If DC squared are serious in removing the flat screen comforts of the feckless, and slashing the pensions of civil servants, while taxing the majority into penury only to lower death duties for the top 3%, could we be facing social meltdown here? It’s a thought.

    I guess he’d better get the boys back from Afghanistan soon.

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  • “the rent seekers have spent all the governments money they need to rob our public services, pensions, schools and NHS to fund their insatiable greed”
    — I’m not sure if that’s a comment on the rent seekers or the government. I agree.

    “economic skinnier”

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  • “National debts are like mortgages – far, far bigger debt burdens we try to ignore but must continually service and, ultimately, repay.”
    No, we don’t have to ever repay, as long as we can service the debt. We can also print down the debt over a number of years.

    On the demographics / pensions issue, the easy solution is for people to work longer in life. The coalition is already making moves in that direction.

    “The liquidationists have one economic tenet: that the relative purchasing power of capital must be maintained no matter how many lives they throw on to the scrapheap in the process.”

    What’s the alternative? Printy printy? Just stop paying the bond interest? I’d love to hear this person’s constructive comments.

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  • It was people like Liam who gave us, ‘independent central banks with low inflation targets create sustainable growth with no more boom and bust’.

    And it was the liberal administration of Bill Clinton that repealed the Glass-Steagall Act.

    The repeal of this Act of 1933, effectively removed the separation that previously existed between Wall Street investment banks and depository banks and has been blamed for exacerbating the damage caused by the collapse of the subprime mortgage market that led to the Financial crisis of 2007–2010.

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  • Stillthinking says:

    Recriminations and the “real” cause of the situation miss the point. This is the situation irrespective of why or how it came about, and the UK is facing a mounting debt load for the next thirty years, which is the main fact of the article. With a funding crisis for the banks in the next year or two.

    Although it seems like we are introducing harsh austerity measures now, are they too little and too late? Is the game over for the UK? I don’t see that our debt will ever get to 300% of GDP so between now and then somebody is going to lose money. In which case, is there any point using the UK government pension saving scheme?

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  • @alan_540 “wasn’t it the one eyed slack jawed jock that gave us an independent BoE?”

    Exactly,but those contributors of a left of centre persuasion conveniently overlook such things, it’s far easier to scorn people, articles and newspapers that hold right of centre views.

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  • the number cruncher says:

    Mt g and alan –

    I do not think any of the left leaning contributors to this site has looked over the fact that Clinton and brown helped screw up our economy by debt expansion. Perhaps you could furnish me with some examples to back up your bold claim.

    I think that nu-labour was not really left and unduly influenced by finance capitalism as was Clinton, they both listened to the prevailing opinions of economists who were firmly in the grip of right leaning bankers. By your reasoning you support all of George Bushes lies and the murder of millions as you happen to be share some of his right wing ideas.

    Stop using’ staw men’ to justify your beliefs or discredit others, all it manges to prove is that you are unable to justify you point of view by reasoned augment.

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  • Had a few sherberts old son? Your spelling appears to be a bit off this evening. A bit like your staid leftwing arguements.

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  • And then I go and blow it by misspelling my reply.

    Nurse… bring me my bottle!

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  • I see the davidgoldsby quote and the reference to Dubya as equally false. Both essentially polarize a discussion about strategy concerning demand management. I might be “on the right of centre” but it doesn’t mean I don’t appreciate and in some cases even agree with Marx.

    LH might not have put his finger on recession, but it doesn’t mean he isn’t right in the observation.

    We should cut the spending. We’re maxed out, and short of pumping cash by the lorryload into the situation, there is only one way. Cuts.

    We should be very wary of people willing to drive inflation – this is the maxed-out borrowers get-out and we should stop it at all costs. Why the hell should a lack of self-discipline by everyone elses problem? Government over-borrow, bod in the street over borrow – tough.

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  • “Nurse… bring me my bottle!”

    Just take 76 of these Paracetemols with it and you’ll be better in the morning.

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