General Election, June 8th

[Alf Bentley]

38 minutes ago, KingGTF said:

 

The government issues gilts to sell on the LSE with set terms. I believe currently the most common is a 30-year coupon bond at 1.75%, and payable after a certain date. There are other securities that are issued, like index-linked bonds but I don't believe it differs too much. So it's not possible to be held to ransom, for the debt to be called in or for interest rates to be hiked, nor is it in the interest of foreign governments to do so. 

 

China holds so much US government debt as a way for it to control the exchange rate.

 

As I say, I'm not very good at understanding high finance. It turns my brain into knots.

 

However:

- Not all government borrowing is long-term. The cost of short-term borrowing will presumably be affected by changes in interest rates and supply/demand.

- Likewise, the terms of new borrowing will presumably be affected?

- Any downgrades of UK credit ratings will presumably increase the interest we have to pay on at least some sovereign debt?

- I presume that government borrowing from foreign financial institutions will be more vulnerable to exchange-rate fluctuations, depending on the currencies concerned?

- Part of the role of the Bank of England is to maintain UK financial stability, whereas different motives will predominate among private-sector institutions and foreign institutions, won't they - profit motive, the interests of foreign nations etc?

 

Feel free to tell me where I'm talking shite, won't you? You're at the LSE, as I recall, so should understand this stuff better than my aging brain! 

[Guest MattP]

13 minutes ago, Sharpe's Fox said:

kind of makes the debate tonight redundant, then. Shan't be watching those showers of shite.

"The losers debate"

 

It does pretty much sum it up - it's going to be absurd racism from Nuttall appealing to the lowest and then class war/anti English sentiment from the rest.

[Guest Foxin_mad]

3 hours ago, Rincewind said:

If pep[le are spending more in rhe shops then it boosts budiness. If you do not have it you cannot spe nd it. Creating more housing creates more jobs. Better schools with smaller classrooms leads to teachers being able to spend more time on kids. Better social care for those with mental issues and disabilities creates more jobs.

 

I do not see reducing peoples income as an encouragement to go out on a spending spree.

But taxing business and rich individuals as a 'punishment' makes them move overseas. You could argue that it would massively impact business if higher earners can no longer use and tip in the services industry, the voluntary sector may see a decrease in in volunteers.

 

I'm not certain that spending money we don't have and can not raise really helps anyone, better to try and bring in the money first then spend it. We already fund our public services to a great level, I still believe in the NHS for example there are huge savings to be made, there are so many layers of middle management its untrue. The procurement of items like toilet rolls and other supplies is more cost effective in some trusts than others some are paying more for bulk than supermarket prices?! there are huge inefficiencies and a lot of incompetent managers that need removing. Of course most people would rather just throw more and more money at it, instead of finding out what could be done better.

 

Pensions etc., I wonder why people who live abroad or who are rich need to receive certain top up payments, there is a lot of wastage across the public sector its never been addressed by any government. I worked in a college and the levels of senior and middle management there were obscene.  Labour just want to top it up as its more union votes.

[Guest Foxin_mad]

52 minutes ago, toddybad said:

A few months ago it was 1.3% for a 10 year bond.

For comparison, the US was closer to 1.7%.

These are extroadinarily low rates which do not suggest unease with our ability to fund our debt.

A country in that position sees 5% and above.

But we are paying £45 billion a year in interests payments, surely better not to have the debt at all and certainly not to increase it with absolutely no solid plan of ever paying it back. What could £45 billion fund.

 

So what we are saying, I can go and take out a 0% credit card have a splurge and then let my grandchildren's, grandchildren pay it back because its cheap.

 

Its not about funding debt, we shouldn't need it and don't need it if we operate correctly. Debt is bad unless there is a clear route to paying it back quickly. We do not know when markets may change having trillions of debt is not good.

[Sharpe's Fox]

9 minutes ago, MattP said:

"The losers debate"

 

It does pretty much sum it up - it's going to be absurd racism from Nuttall appealing to the lowest and then class war/anti English sentiment from the rest.

A Scottish nationalist, a Welsh nationalist, an English Nationalist, a European Nationalist and a whatever the **** the Green Party is.

[Realist Guy In The Room]

1 hour ago, MattP said:

Maybe that demographic have seen it all and realise it's realistic?

I think its more likely she knows that the old vote will justify the changes to themselves and she wont have too.

 

 

[leicsmac]

Just now, Realist Guy In The Room said:

I think its more likely she knows that the old vote will justify the changes to themselves and she wont have too.

 

 

This.

 

The older demographic aren't any more altruistic or less self interested than anyone else, particularly when it comes to long term issues.

[DJ Barry Hammond]

30 minutes ago, Sharpe's Fox said:

A Scottish nationalist, a Welsh nationalist, an English Nationalist, a European Nationalist and a whatever the **** the Green Party is.

 

...go into a pub - just need a punch line? 

[Buce]

45 minutes ago, Sharpe's Fox said:

A Scottish nationalist, a Welsh nationalist, an English Nationalist, a European Nationalist and a whatever the **** the Green Party is.

 

The World Nationalist Party?

[Guest]

47 minutes ago, Foxin_mad said:

But we are paying £45 billion a year in interests payments, surely better not to have the debt at all and certainly not to increase it with absolutely no solid plan of ever paying it back. What could £45 billion fund.

 

So what we are saying, I can go and take out a 0% credit card have a splurge and then let my grandchildren's, grandchildren pay it back because its cheap.

 

Its not about funding debt, we shouldn't need it and don't need it if we operate correctly. Debt is bad unless there is a clear route to paying it back quickly. We do not know when markets may change having trillions of debt is not good.

You're missing the point. Governments would find out extremely difficult to operate without debt. Both because the government sometimes wants or needs to spend on particular areas above the level taxes allow, but also because the buying and selling of bonds is one of the methods that can be used to moderate liquidity within the economy. That's not to say that there aren't countries with no national debt but you won't find that any of them are huge economies.

 

National debt is not the same as personal debt. It is not as simple as debt is bad. This is why i say that they're needs to be real non-political discussion and education about the way our economy actually works, including what the roles of debt and taxation actually are. 

[DJ Barry Hammond]

55 minutes ago, Foxin_mad said:

But we are paying £45 billion a year in interests payments, surely better not to have the debt at all and certainly not to increase it with absolutely no solid plan of ever paying it back. What could £45 billion fund.

 

So what we are saying, I can go and take out a 0% credit card have a splurge and then let my grandchildren's, grandchildren pay it back because its cheap.

 

Its not about funding debt, we shouldn't need it and don't need it if we operate correctly. Debt is bad unless there is a clear route to paying it back quickly. We do not know when markets may change having trillions of debt is not good.

 

Ok, some key clarification;

 

The debt is huge, that won't be wiped out for a long time, so the interest payments will remain for foreseeable future. 

The deficit however, is the gap between what the government gets in and what it spends on an ongoing basis - which is currently growing the debt - and based on the Conservatives manifesto, that won't be balanced until at least 2025.

(A surplus is when a government gets more in than it spends - this is needed to reduce the debt)

 

So the question at the moment is how do we best bridge the gap between what we spend and what we get in (the deficit, not the debt).

 

One approach would be to cut back on what you spend and/or increase taxes, but that can also have a negative impact on what a government receives back in and of course is not popular because people want things like hospitals, schools and pension, plus don't like paying taxes. 

 

Another approach, is to speculate to accumulate a little - borrow money to spend on projects with the intention of boosting the wider economy thus increase the income that the government gets back (much like a business might do in order to expand their operation and what they hope, their profits when they might not have the spare capital to do so).

 

Of course a third way, would be a mixture of the two. 

 

Now this is a very simplistic view of the issue and naturally economics and the impact of different decisions on both general and fisical policy (e.g. a stimulus such as quantative easing) mean things are a lot more complicated than you or I really want to go into...

 

...but to give a clue in terms of each parties position on the economy... chances are, they're both wrong and that they've slanted things to protect their vested interest groups.

 

 

 

 

[Jon the Hat]

14 hours ago, Rincewind said:

He has been working actually ever since being elected as leader TWICE. He's been up and down the country talking to people. He's prevented quite a number of bills being paqssed. It's just that there has been less media interest in that side of him.

He was being questioned by a news reporter who said that people like Labour policies but not the leader. After a pause to smile he said being a good leader was not about  shouting at others but listening to people and that is what he had been doing since being leader

I find it incredibly reassuring Ken that you support him so ardently.  Makes me very sure he is not going to win.

[Bobby Hundreds]

I wonder what people would have said had Labour presented a manifesto devoid of costings?

[Rincewind]

29 minutes ago, Jon the Hat said:

I find it incredibly reassuring Ken that you support him so ardently.  Makes me very sure he is not going to win.

It is not so much that I support him. I find the alternative finger in the mouth revolting.I believe there is more empathy emitting from a plank of wood than what could ever come out of May.

I was also giving credit where ir was due in response to the claims that he had done nothing other than turn up for a meeting minus a tie. not exactly the most important thing to someone who is struggling on disability benefits.

 

Found this for the more knowledgeable amongst you to discuss. Not my area of expertise but having skimmed it seems an interesting read.

http://falseeconomy.org.uk/cure/how-big-is-the-problem

 

Dont' know year of publication but there were figures from 2015 so not that ancient.

 

[Jon the Hat]

19 minutes ago, Bobby Hundreds said:

I wonder what people would have said had Labour presented a manifesto devoid of costings?

They would have said "what happened to that fully costed manifesto you promised us for the past 6 months guys?"  

 

People tend to trust the tories on the economy, so they focus on how they are going to look after the NHS & social care, and the be the part for the mainstream.  No one trust Labour on the economy, so if they spend months telling us the will fully cost their manifesto, they kind of have to do it.

[Rincewind]

They will still be told it is wrong by Syd down the pub.

[Sol thewall Bamba]

5 hours ago, EnderbyFox said:

#LibDemFightBack

Looks good for Labour but they're not taking anything out of the Tories so it doesn't really make that much difference. Until JC can attract a few million votes away from May to him it's still a forgone conclusion really. 

[Guest Kopfkino]

2 hours ago, Alf Bentley said:

 

As I say, I'm not very good at understanding high finance. It turns my brain into knots.

 

However:

- Not all government borrowing is long-term. The cost of short-term borrowing will presumably be affected by changes in interest rates and supply/demand.

- Likewise, the terms of new borrowing will presumably be affected?

- Any downgrades of UK credit ratings will presumably increase the interest we have to pay on at least some sovereign debt?

- I presume that government borrowing from foreign financial institutions will be more vulnerable to exchange-rate fluctuations, depending on the currencies concerned?

- Part of the role of the Bank of England is to maintain UK financial stability, whereas different motives will predominate among private-sector institutions and foreign institutions, won't they - profit motive, the interests of foreign nations etc?

 

Feel free to tell me where I'm talking shite, won't you? You're at the LSE, as I recall, so should understand this stuff better than my aging brain! 

Well this has made me rack my

I think the key thing is, it doesn't matter who holds government debt in terms of security or cost etc, a foreign government couldn't buy it up and hold the government to ransom because they are fixed products. The government issues a gilt which is then brought on the market with the fixed income and maturity terms, it's not like they go out to an institution to request money in the way we do to the bank. I guess they could try to affect the secondary market which would change things slightly but it wouldn't really be beneficial. See I thought @toddybad was saying that it matters that the BoE holds some of the debt, as if this makes that portion of the debt different to the rest. I guess it matters to a degree that the BoE holds 25% of the debt because it could just wipe it if it wanted but it shouldn't and wouldn't. That's a different argument altogether

 

- Yeah of course it's not all long-term. Gilts make up most of the government's debt and the UK issues gilts with a maturity date between 5 and 50. They are fixed-income and once issued that doesn't change. Albeit, as they mature, the government has to issue more and so it could become more expensive with an interest rate movement but not anytime soon. And then we can go into yield curves and how bonds are actually priced, but I'm not sure anyone would want that. So what will actually be happening at the moment is that the cost of debt to the government will be fallings as bonds that were issued many years ago at 8%, for example, will be maturing and the government will simply issue new gilts but at a cheaper income. Also the treasury issues papers for debt less than a year but I'm not at all clued up on that side of it.

- Of course new terms will change with changes to interest rates but government debt is always (for solvent, developed nations) relatively cheap. This, in theory is all factored in to the yield curve of a gilt to smooth it out across the period to maturity so there is a lack of volatility in the cost of government debt. 

- Credit ratings are quite a superficial thing actually. Recent changes haven't really had much of an effect; they provide a guidance to investors but it doesn't directly affect borrowing costs. As I say, recent changes have been bad PR but had no real effect on cost of borrowing

- The UK government, as far as I'm aware, doesn't have any foreign-currency issued gilts. The government issues gilts in sterling (there has been occasions when they have issued small amounts of foreign-currency gilts) for exactly the reason as to not be vulnerable to exchange-rates. Theory would say that it might be more difficult to sell gilts if a foreign investor is going to take a hit from the exchange rate but they're desirable products for a reason; that will only really affect the secondary markets which doesn't concern the government.

- As I say, the BoE owns the same gilt as anyone else, the debt that it owns can't behave in a more favourable way than the debt owned by a different institution

 

 

Gilts are complex products so whilst I believe I have the basics worked out here, I might be wrong. I have friends that will be doing internships on fixed-income desks over the summer, poor sods. 

 

As for me, LSE and I may well be parting ways. 

[EnderbyFox]

Paul Nuttall on this Leaders Debate, wow. Was never really a huge admirer of Nigel Farage but Paul Nuttall in comparison comes across like a bloke who's been told to take the UKIP leadership to avoid getting a sanctions from the Job Centre

[DJ Barry Hammond]

1 hour ago, EnderbyFox said:

Paul Nuttall on this Leaders Debate, wow. Was never really a huge admirer of Nigel Farage but Paul Nuttall in comparison comes across like a bloke who's been told to take the UKIP leadership to avoid getting a sanctions from the Job Centre

 

Find that hard to believe, given he had a trial with Tranmare, was the first man on the moon, played bass for Dexies Midnight Runners, invented Cluedo, is a certified lion tamer and has a doctorate in marine biology. 

[Jon the Hat]

Has anyone found anything positive to say about the conservative manifesto yet?

[Rincewind]

5 minutes ago, Jon the Hat said:

Has anyone found anything positive to say about the conservative manifesto yet?

Only if you are the sort of person that enjoys pissing on homeless people (translated for Mail readers - tramps.)

No offense intended.

[ajthefox]

17 minutes ago, Jon the Hat said:

Has anyone found anything positive to say about the conservative manifesto yet?

Dianne Abbott is nowhere near it...?

[Sharpe's Fox]

25 minutes ago, Jon the Hat said:

Has anyone found anything positive to say about the conservative manifesto yet?

My grandma was justified selling her house and moving into council rented property before Theresa May decided to asset strip her.

[Jon the Hat]

7 minutes ago, Sharpe's Fox said:

My grandma was justified selling her house and moving into council rented property before Theresa May decided to asset strip her.

Only if she then burnt the proceeds I suspect.