UK 'must cut spending or raise taxes,' say experts

Generali

bubblesmoney wrote: »

learnt one more new thing today. thanks generali

That's ok.

You need to be a little bit careful about drawing assumptions from derivatives prices about the underlying asset.

For example, lots of contracts settle in cash only - the underlying asset will never move. Say you bought a tonne of wheat for delivery in 6 months time for $300, you will never actually see that wheat. If the price has risen to $400 by the time the contract expires, you will be expected to sell a tonne of wheat for $400 and get a net $100 in cash.

That means that if lots of people have been buying wheat forward, the spot price may be depressed as people close out their position as contracts come to expiry.

Rochdale_Pioneers

tomstickland wrote: »

a) Which is exactly the point I originally made. Brown has recently converted to Keyne's method, but forgot to save during the boom.

Sorry, but where dod you learn to add? "Forgot to save during the boom"? According to the data you posted, debt went down during the boom. Are you disputing your own data?

And I will take your list of complaints about investment and throw it straight back at you - what did we get for an additional 2,000 basis points of borrowing in the early 90s? The Tories spent an ocean more cash than you bemoan Labour "wasting" - what then did we get for the cash in the early 90s?

My problem with this argument isn't a discussion about the merits of Brown borrowing to invest or indeed hat he got for it - those are fair arguments. Its this illusion you and the Tory front bench are trying to paint that 1997 was year zero. The point is always that Labour have blown the cash with the suggestion that the Tories never did. OK then - where did scores of Billions that YOUR data shows the Tories added to borrowing in 1990 - 1995 go?

Generali

I think the problem is that whereas between 1990-95 the UK was facing tough economic times and so cash was borrowed to spend on Government consumption and investment, in the period 2000-8, growth has been high yet still Government debt has risen.

To make matters worse, we were assured by Mr Brown that borrowing would be nil over the course of the economic cycle. That appears to be a crock of poo.

Rochdale_Pioneers

Generali wrote: »

I think the problem is that whereas between 1990-95 the UK was facing tough economic times and so cash was borrowed to spend on Government consumption and investment, in the period 2000-8, growth has been high yet still Government debt has risen.

To make matters worse, we were assured by Mr Brown that borrowing would be nil over the course of the economic cycle. That appears to be a crock of poo.

So its OK for a Tory government to run an economic boom that has a catastrophic effect on inflation and interest rates which means borrowing scores of billions to be spent with little to show, but not OK for a Labour government to run an economic boom based on a global pyramid scheme and borrow money which actually shows some results? Even if you dispute what Brown got for the cash the worst case scenario is that Brown borrowed an additional 7% for nowt, vs 20% for nowt in the 90s.

I am fine with arguments about the rights and wrongs of what Brown spent the money on - that is politics. But its the gross hypocracy on display thats so funny, as if pre-97 the economic record of the Tories was spotless. When you compare the two records the figures speak for themselves - Labour reduced our level of national debt vs what was in iherited. The Tories increased it.

So I am absolutely fine with criticism of Brown - he deserves it. Its excretions like "we're bankrupt", "We're the most indebted nation on earth", "we're calling in the IMF" - utter lies spread with one purpose and that is to try and bring the economy down. Why do the Tories want to crash the economy further than it already is? Because it suits them politically - screw you me and everyone else, if we lose our jobs and our houses thats fine to the Tories as long as they win. They're probably going to win the election anyway, so why the attempt to damage the economy further?

Wookster

tomstickland wrote: »

Hey, first article I see on the Times:
http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article5636437.ece

According to Rochdale and Sir Humphrey government spending provides good value for tax payers :eek:

purch

You need to be a little bit careful about drawing assumptions from derivatives prices about the underlying asset

We've already learnt that the HARD way !!!! :eek:

Wookster

Rochdale_Pioneers wrote: »

Its excretions like "we're bankrupt", "We're the most indebted nation on earth", "we're calling in the IMF" - utter lies spread with one purpose and that is to try and bring the economy down.

These are quite real concerns.

Think about it Rochdale, government debt grew from ~32% to ~52% in the last recession (1990-1995). This time around we are going into a (significantly worse) recession with much higher debt (50% as opposed to 32%) which doesn't bode well for what debt will rise to when growth returns.

Not only that but the sheer quantum of liabilities being taken on are gigantic e.g. RBS.

This is scary stuff.

SGE1

Wookster wrote: »

According to Rochdale and Sir Humphrey government spending provides good value for tax payers :eek:

Are you proof of that being incorrect is...? I'd be interested to know.

Rochdale_Pioneers

Wookster wrote: »

These are quite real concerns.

Think about it Rochdale, government debt grew from ~32% to ~52% in the last recession (1990-1995). This time around we are going into a (significantly worse) recession with much higher debt (50% as opposed to 32%) which doesn't bode well for what debt will rise to when growth returns.

Not only that but the sheer quantum of liabilities being taken on are gigantic e.g. RBS.

This is scary stuff.

We started with 44%, not 50%. Labour pay off debts shock!

But you're right, we're going to be far more heavily in debt than last time - the last forecast from the IFS suggested 57%. How will we cope with such high levels of debt? Shall we ask the Germans? The Americans? The Italians? The Greeks? The Belgians? You have to put national debt into context and the truth is that we will still end up with less debt than where all these other countries went into the recession.

And they are spending scores of billions as we are - their debt levels will be hugely higher than ours even when we come out of it. Your question about how we will cope needs to be widened - how will the developed world cope? In 1990 - 1995 we hugely increased national debt by ourselves, with no global recession forcing a borrowing increase from elsewhere.

This time we're facing real competition from other countries for investors cash - we need to raise billions as does everyone. So far our debt is attracting punters and our credit rating is holding up - which is more than you can say for Germany or Spain. What happens when the cash that developed nations needs is no longer available? We will all be facing the need to cover off all these banking losses with no cash available.

THAT is when we need to be scared. How will we reconstruct the capitalist system once the west defaults en-masse?

SGE1

Rochdale_Pioneers wrote: »

We started with 44%, not 50%. Labour pay off debts shock!

But you're right, we're going to be far more heavily in debt than last time - the last forecast from the IFS suggested 57%. How will we cope with such high levels of debt? Shall we ask the Germans? The Americans? The Italians? The Greeks? The Belgians? You have to put national debt into context and the truth is that we will still end up with less debt than where all these other countries went into the recession.

And they are spending scores of billions as we are - their debt levels will be hugely higher than ours even when we come out of it. Your question about how we will cope needs to be widened - how will the developed world cope? In 1990 - 1995 we hugely increased national debt by ourselves, with no global recession forcing a borrowing increase from elsewhere.

This time we're facing real competition from other countries for investors cash - we need to raise billions as does everyone. So far our debt is attracting punters and our credit rating is holding up - which is more than you can say for Germany or Spain. What happens when the cash that developed nations needs is no longer available? We will all be facing the need to cover off all these banking losses with no cash available.

THAT is when we need to be scared. How will we reconstruct the capitalist system once the west defaults en-masse?

I've blathered on about this enough, but 57% isn't even that big a deal. The EU Economic and Monetary Union rules dictate that member countries should have debt levels of no more than 60% of GDP - that's where they draw the line between acceptable levels of debt, and levels of debt that are too high. So even given the worst case scenario, we're still within the boundaries of 'reasonable' debt levels, as set by the European Central Bank.