Debt

[Harry - LCFC]

It's a topic that isn't talked about much I find - politicians, the media, the public, FTers - not a huge amount said about it by anyone. Cameron mentions the deficit quite often but there seems to be little discussion about the next step down the line.

 

This isn't a post attempting to introduce a topic, more a request to others to provide information about something I'm unsure of but here are some basic figures to start off with: the UK's national debt currently stands at a little under 1.4 trillion pounds, 91% of GDP, and recently I've been wondering how much of a problem that is.

 

 

 

Some commentators I've read have said that the UK's debt will be a catastrophic problem in future but this graph suggests that the current situation is quite manageable (although I'm aware debt could rise substantially over time with an ageing population having a significant impact). I hope this shows why I'm a little uncertain about the issue.

 

The coming election will be the first one I am eligible to vote in and as a young person I'm rather concerned about the future consequences of the national debt. So much so that I think I may well vote for the Conservatives, not because I favour their policies particularly, but because of their overall policy of reducing the deficit.

 

Thanks for your help.

[Captain...]

The issue is not debt so much as the deficit, we are losing money each year, being in debt doesn't matter if you can pay it off, but each year the debt is getting bigger as we are running the country at a huge loss, the austerity measures stifled the economy and the deficit has been increasing until very recently.

 

Those peaks of debt as a percentage of GDP in the 20th century correspond with the World Wars, where not only did we spend a lot of money our output was seriously limited, but after the wars we weren't running a deficit so the debt was manageable.

[MooseBreath]

one post in and it has already turned political

I wouldn't worry too much about national debt tbh as long as GDP is going in the right direction. Obviously you should still vote conservative if you have any interest at all in the health of the economy.

[Trav Le Bleu]

What I never understand is with so many countries being in debt - who do they owe? Surely someone must be getting something out of this?

[MooseBreath]

What I never understand is with so many countries being in debt - who do they owe? Surely someone must be getting something out of this?

Pension funds, british banks, other countries, private businesses

[Ric Flair]

Pension funds, british banks, other countries, private businesses

 

Do they ever pay it off? Send the bailiffs in

[MooseBreath]

Do they ever pay it off? Send the bailiffs in

Yes the British government always pay, that's why it has a good credit rating, "AAA" or whatever. If you've got any pension then you more than likely own some of that debt. The government borrows from its citizens (and others) in this way because it is confident it can invest it well enough to cover the cost of the interest. Investors are happy because they get a reasonably risk free return.

There's no reason for this relationship to stop unless the economy looks unstable and as though the risk of the government defaulting on the debt is on the rise. So while GDP is on the up and we have a responsible government in charge who are keeping spending in check then it isn't something we need to worry about. Obviously it is better to have no debt at all and we should be looking to pay it down, but the existence of debt is nothing to worry about, and is probably actually a good thing for your long term personal wealth.

[Harry - LCFC]

I take the point on debt being acceptable provided it's under control, but what if it's not under control?

 

No-one's really addressed the question in full. An ageing population means our dependency ratio will increase (a good reason to keep immigrants of the right sort coming in might I say) making it increasingly difficult to keep public services going as they are - I've not looked at them but I would imagine forecasts for the NHS are particularly worrying for example.

 

Surely this is a problem that can't be ignored?

[The God Emperor]

it can be a problem and it probably will be for us. the government doesn't pay its debts with revenue, they pay it off by borrowing from other investors and giving that money to the previous investors. Its a ponzi scheme but because the government do it its A ok and not illegal.

the real problems come when the government defaults on these loans (see greece, Cyprus etc) and if this happens then they will most likely print money like mad to pay the debt off and we have to live with the outcomes of this.

Cameron is cutting nothing, only projected spending, and he'd never be voted back in if he made the significant cuts that are needed.

[MooseBreath]

That's why the pension age keeps going up, the state pension is falling in real terms, auto-enrolment has come in, and the government are fighting unions over pensions for teachers/firefighters etc.

Tough decisions that any responsible government won't shy away from.

[Strokes]

I take the point on debt being acceptable provided it's under control, but what if it's not under control?

No-one's really addressed the question in full. An ageing population means our dependency ratio will increase (a good reason to keep immigrants of the right sort coming in might I say) making it increasingly difficult to keep public services going as they are - I've not looked at them but I would imagine forecasts for the NHS are particularly worrying for example.

Surely this is a problem that can't be ignored?

It needs addressing, but you have to keep the output up otherwise it has an adverse effect. It should have been addressed when we had 10 years of successive growth but the pigs had their snouts firmly in the trough.

[Captain...]

I take the point on debt being acceptable provided it's under control, but what if it's not under control?

 

No-one's really addressed the question in full. An ageing population means our dependency ratio will increase (a good reason to keep immigrants of the right sort coming in might I say) making it increasingly difficult to keep public services going as they are - I've not looked at them but I would imagine forecasts for the NHS are particularly worrying for example.

 

Surely this is a problem that can't be ignored?

 

This is why it has been a problem, because it wasn't under control, now we are at least cutting the deficit, whilst we are still running a deficit it is going down, which means the debt is going up slower, if we get back into the black, then we can start reducing the debt, as Strokes said, that is what we should have been doing during Labour's period of growth and instead of austerity measures we should have been spending and investing in industry to increase the production and revenue.

 

The problem is that being unable to reduce the deficit and the debt has given the government license to privatise again, which is not very forward thinking, admittedly the post office is a dinosaur and dying out, but it won't be the last, all in the name of cutting debt (which is irrelevant when you need to cut the deficit) seeing as the Royal Mail had an operating profit of £400 million, selling it may clear some debt, but it will increase the deficit, add to that we are absorbing the £10 billion deficit of their pension scheme, makes it not very attractive at all to the tax payer.

 

So what to do about it? We need to attract business, which is why the top rates of tax and business tax was cut, (as long as the businesses we attract pay tax), our film industry for example is booming because we slashed taxes on film making, which is creating employment as well as contributing to the GDP. Unfortunately Cameron has plunged potential investors in the UK into doubt by declaring that we will have a referendum in Europe in 2015, which means that companies are wary of investing as the Economic landscape could change very dramatically.

 

We are not going to clear our debt by selling off our assets, if the state had kept the energy companies, look at their huge profits, and BT, just before the internet which makes communications so important to our everyday life, we wouldn't have such a high deficit.

 

To tackle the debt austerity and cuts are not the answer, it hasn't worked here, it didn't work in Greece or in Ireland, they need to increase production and subsequently revenue.

[jonthefox]

I owe £3 for the tea money at work.

[MooseBreath]

This is why it has been a problem, because it wasn't under control, now we are at least cutting the deficit, whilst we are still running a deficit it is going down, which means the debt is going up slower, if we get back into the red, then we can start reducing the debt, as Strokes said, that is what we should have been doing during Labour's period of growth and instead of austerity measures we should have been spending and investing in industry to increase the production and revenue.

The problem is that being unable to reduce the deficit and the debt has givent he government license to privatise again, which is not very forward thinking, admittedly the post office is a dinosaur and dying out, but it won't be the last, all in the name of cutting debt (which is irrelevant when you need to cut the deficit) seeing as the Royal Mail had an operating profit of £400 million, selling it may clear some debt, but it will increase the deficit, add to that we are absorbing the £10 billion deficit of their pension scheme, makes it not very attractive at all to the tax payer.

So what to do about it? We need to attract business, which is why the top rates of tax and business tax was cut, (as long as the businesses we attract pay tax), our film industry for example is booming because we slashed taxes on film making, which is creating employment as well as contributing to the GDP. Unfortunately Cameron has plunged potential investors in the UK into doubt by declaring that we will have a referendum in Europe in 2015, which means that companies are wary of investing as the Economic landscape could change very dramatically.

We are not going to clear our debt by selling off our assets, if the state had kept the energy companies, look at their huge profits, and BT, just before the internet which makes communications so important to our everyday life, we wouldn't have such a high deficit.

To tackle the debt austerity and cuts are not the answer, it hasn't worked here, it didn't work in Greece or in Ireland, they need to increase production and subsequently revenue.

Total mess of a post. Fundamentally incorrect across the board.

[ADK]

If you want to know the answers then study economics, don't ask random people on a football forum.

[The Year Of The Fox]

Was there ever a time a country wasnt in debt?

Serious question.

[Webbo]

If you want to know the answers then study economics, don't ask random people on a football forum.

Excuse me, I've got CSE grade 2 economics.

[Webbo]

I take the point on debt being acceptable provided it's under control, but what if it's not under control?

 

No-one's really addressed the question in full. An ageing population means our dependency ratio will increase (a good reason to keep immigrants of the right sort coming in might I say) making it increasingly difficult to keep public services going as they are - I've not looked at them but I would imagine forecasts for the NHS are particularly worrying for example.

 

Surely this is a problem that can't be ignored?

Have you been reading Money Week's The end of Britain?

[Stadt]

Have you been reading Money Week's The end of Britain?

[whoareyaaa]

Was there ever a time a country wasnt in debt?

Serious question.

 

Its a good question probably when they first started printing money but apart from that I don't think so.

 

I think China is debt free isn't it? as they don't really give out credit to there people and seem to be lending the US and UK money, I heard that the US owe China 15 or 40billion maybe more like 500billion I can't remember as I seen it on the news a while back but I know it was a hell of a lot.

 

I don't even worry about stuff like this though as the UK and any other country that is in debt will never I repeat never be debt free, it will continue to rise then drop then rise so the Government can keep the public in order. simple as that really.

[Harry - LCFC]

If you want to know the answers then study economics, don't ask random people on a football forum.

 

I am studying economics! Early stages atm though.

 

 

Have you been reading Money Week's The end of Britain?

 

No, not seen that. Just happened to have bumped into a few articles on the topic recently.

 

EDIT: Just seen the ad at the bottom of the page 

[Webbo]

[MooseBreath]

Was there ever a time a country wasnt in debt?

Serious question.

I think pretty much all countries have some debt but quite a few countries currently hold more assets than debt, so they have no net debt.

[ADK]

Most private businesses have debts too.

 

There is a generally held perception that debt is bad, but this isn't really true.

 

Lending is an absolutely fundamental part of capitalism.

[Zingari]

Barry Jenkins still hasn't paid me back for stumping up for him at the Anglo-Bengal in 1982 when he claimed he'd lost a tenner .

 

the bastrad !!!!