Darling will spend his way out of recession

baby_boomer

The Economists fear further indebtedness. So what is our debt and does it matter?

Sunday Herald

"...According to London-based think tank the Centre for Policy Studies (CPS), Britain is not that far away from the horror debt levels of the last century, largely as a result of the aftermath of the credit crunch. The CPS has calculated that the government has total debt of £1.9trillion, or three times greater than the official Treasury figures, which have long been suspect to most economists. This is equivalent to 127% of GDP -£75,984 for every household.

It gets worse. While these numbers include the cost of projects financed through PFI, unfunded public sector pension liabilities, the debt incurred by Network Rail and the nationalisations of Northern Rock and Bradford & Bingley, they do not count the price of October's big bank bail-out.

The think tank believes this would boost further these figures by up to £500 billion.
"This would imply a total debt of £2.35 trillion - the equivalent of 161% of GDP or over £96,475 per household," the research summarises.

While this may not be as high as the 250% of GDP applying in 1946 in the aftermath of the ruinously expensive war, it is still an alarming figure in peacetime..."

And hopefully we will see some return on the investment in the banking sector .

But seriously :eek: after 60 years without a war, to be getting on for a similar position to where we were after 6 years of fighting the Germans and saving the world? :eek:

And that's before we've paid for the coming recession!

Generali

baby_boomer wrote: »

The Economists fear further indebtedness. So what is our debt and does it matter?

Sunday Herald

"...According to London-based think tank the Centre for Policy Studies (CPS), Britain is not that far away from the horror debt levels of the last century, largely as a result of the aftermath of the credit crunch. The CPS has calculated that the government has total debt of £1.9trillion, or three times greater than the official Treasury figures, which have long been suspect to most economists. This is equivalent to 127% of GDP -£75,984 for every household.

It gets worse. While these numbers include the cost of projects financed through PFI, unfunded public sector pension liabilities, the debt incurred by Network Rail and the nationalisations of Northern Rock and Bradford & Bingley, they do not count the price of October's big bank bail-out.

The think tank believes this would boost further these figures by up to £500 billion.
"This would imply a total debt of £2.35 trillion - the equivalent of 161% of GDP or over £96,475 per household," the research summarises.

While this may not be as high as the 250% of GDP applying in 1946 in the aftermath of the ruinously expensive war, it is still an alarming figure in peacetime..."

And hopefully we will see some return on the investment in the banking sector .

Well you need to be a bit careful about measuring national debt. For example, AIUI when a bank is nationalised the whole of its liabilities become part of the national debt but the assets aren't set against that. Clearly that is a massive distortion.

The point is still a good one however.

Also it seems that Governments across the world are trying to borrow vast sums of money at a time when the biggest customers for sovereign debt, the Arabs and Far Eastern central banks, seem to have lost their appetite for it.

What do you think Gordon will do if he can't borrow the money? Will he get the Bank of England to increase rates, will he cut spending (the correct response IMO) or will he force pension funds to invest in Government bonds (the most likely outcome IMO).

Oh and a quick thought for my conspiratorial buddies out there. The Government has given a huge boost to the moral correctitude of the pension system by allowing women to 'buy back years' of their state pension. This means that they will pay a load of money to state coffers now and add to the unfunded off balance sheet liabilities later. Why do you think a Government in a tight financial spot might do such a thing?

neverdespairgirl

hethmar wrote: »

Well we will be paying for a long time whether they go or not! I believe we are still paying back money borrowed for WW2.

No, don't worry, the last payment to America was December 2006, I think. Originally it was £1,000 million or so.

Generali

neverdespairgirl wrote: »

No, don't worry, the last payment to America was December 2006, I think. Originally it was £1,000 million or so.

There are still undated War Loans which I believe are still unredeemed. I'm not positive though.

Link here's Buggs Bunny selling War Bonds to our American Cousins....

neverdespairgirl

You could be right, I think the Dec 2006 payment was for hte lend lease scheme.

Theodore_Roosevelt_ASH

Can anyone explain why the US with truly massive current account and budget deficits is seeing it's dollar rise against almost all other world currencies except the yen? Who is buying all those dollars and how long can it continue?

baby_boomer

Good point. The American twin deficits are not looking rosy.

I assume it's terrified emerging market investors pulling out their money and putting it into the $ as a relatively safe haven.

baby_boomer

Gordon says sod the economists we will borrow and spend - it's the only "responsible" thing to do - Telegraph - Gordon's forthcoming speech to the City.

Where's George Osborne when you need him? . The Yacht affair has demolished his ability to oppose .

Incredibly Gordon uses his humiliating personal climbdown over the 10p tax fiasco as evidence of his prescient Keynesian forward planning :rotfl: :rotfl: :rotfl:

"...."We will and can allow borrowing to rise to help restore demand and to come to the aid of workers, businesses and homeowners. "We have already combined targeted support through the tax system - such as the temporary increase in stamp duty thresholds, the freeze in fuel duty and the £120 tax rebate for basic-rate taxpayers - with a commitment to maintain the necessary government investment to enable Britain to benefit from the upturn...."

How brazen can you get ?

On the broader question, Roger Bootle argues that we DO need Keynesian solutions - Telegraph

But he identifies two problems, neither of which I'd personally want to leave to Gordon because of his naturally statist inclinations.

".....First, what is the most effective, and least inefficient, way of employing the Keynesian remedy? Second, when depression conditions have passed, as eventually they will, how can we successfully put the great man back in his box, and trim back the pump-priming role of the state?"

tomstickland

I think Gordon Brown is the rich uncle funding the Labour dreams. "I've got a special treat for you: new hospitals and more spending on schools".
It's only later that people realise that he's not the rich uncle at all and that he borrowed all the money.

Generali

baby_boomer wrote: »

Good point. The American twin deficits are not looking rosy.

I assume it's terrified emerging market investors pulling out their money and putting it into the $ as a relatively safe haven.

That's exactly it IMO. It's a dash for quality; people want to hold US T-bills. Where else would you put your money? The only other place is the Euro and there is a genuine risk that could blow up.