FT: The cost of burgeoning national debt

ninky_2

Sir_Humphrey wrote: »

A lot lower than most other advanced countries. Most of the recent increase is down to the bank rescues, a policy supported by both Labour and the Tories. Had the banking system collapsed, the economic armageddon would have been much more expensive.

and what about not paying the debt back. are there international bailiffs?

Sir_Humphrey

ninky wrote: »

and what about not paying the debt back. are there international bailiffs?

If the UK defaulted, they would find it very much harder to borrow afterwards, but China would not turn up and repo our Aircraft Carriers.

The government is nowhere near that stage anyway. It is easier and cheaper for governments to sustain debts than companies and it is easier and cheaper for companies to sustain debts than individuals. Any politico who compares running a personal budget to running a country's budget is taking the electorate for fools (i.e they are lying). Don't let your intelligence be insulted.

benood

Sir_Humphrey wrote: »

A government borrowing a lot is very different to an individual borrowing a lot. Forget any idea that running a nation's budget is anything like a personal budget.

I'm sure Gordon would agree wholeheartedly.

Sir_Humphrey

benood wrote: »

I'm sure Gordon would agree wholeheartedly.

As well as absolutely every other person who has ever been involved with running a country's budget, anywhere in the world, for at least the last 100 years. You do not seriously think that governments (or companies for that latter) pay 27% APR do you. Take off the tin foil hat and read some books on the subject. Sheesh.

lostinrates

Sir_Humphrey wrote: »

As well as absolutely every other person who has ever been involved with running a country's budget, anywhere in the world, for at least the last 100 years. You do not seriously think that governments (or companies for that latter) pay 27% APR do you. Take off the tin foil hat and read some books on the subject. Sheesh.

As a matter of interest, as Iran is featuring heavily to day, do the islamic countries opposed to personal debt also oppose govermental debt? I'm curious

Sir_Humphrey

lostinrates wrote: »

As a matter of interest, as Iran is featuring heavily to day, do the islamic countries opposed to personal debt also oppose govermental debt? I'm curious

AIUI, Islam forbids interest rather than money borrowing per se. For borrowing, there are ways of interpreting Islam/adjusting the borrowing so that payments count as something other than interest. AIUI, this is controversial, as some Muslims do not consider Islamic mortgages to be okay (I know perfectly sensible Muslims who have this view - we are not talking about the tiny minority of nutters here).

Islam is just like any other religion in that it is open to interpretation, much as rich Christians are able to interpret away the camel through the eye of needle thing.

lostinrates

Sir_Humphrey wrote: »

AIUI, Islam forbids interest rather than money borrowing per se. For borrowing, there are ways of interpreting Islam so that payments count as something other than interest. AIUI, this is controversial, as some Muslims do not consider Islamic mortgages to be okay (I know perfectly sensible Muslims who have this view - we are not talking about the tiny minority of nutters here).

Islam is just like any other religion in that it is open to interpretation, much as rich Christians are able to interpret away the camel through the eye of needle thing.

Yes, this I understand, my post was poorly phrased, forgive me, eh?:o But I've been quite interested in some coverage of the attempts to encourage outside investment in Iraq now, and wondered if this encouragement of outside investment was partly to limit exposure to loans (and indeed interest repayable on them). It was only a slight curiosity really, but my wndering seemed relevant-ish.

ninky_2

lostinrates wrote: »

As a matter of interest, as Iran is featuring heavily to day, do the islamic countries opposed to personal debt also oppose govermental debt? I'm curious

I don't know. Iran certainly does not escape hypocrisy (so that might suggest an answer).

As a nation who do we actually owe the money to? Are there rich countries that are lending to all the poorer ones? It really is another language to me.

Sir_Humphrey

ninky wrote: »

I don't know. Iran certainly does not escape hypocrisy (so that might suggest an answer).

As a nation who do we actually owe the money to? Are there rich countries that are lending to all the poorer ones? It really is another language to me.

99.9% of people do not understand this stuff. The money is owed to whoever buys government gilts (known as T-Bills in the USA). The government sells these bits of paper, and pays a fee to the holder of those bits of paper until they run out (over several decades). These bits of paper are sold on between different people.

The bodies holding those bits of paper tend to be Central Banks, Pension Funds, Investment Funds and the suchlike. They are considered just about the safest sort of investment, which means the government does not have to pay much to people to hold them..

http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/gilt/default.stm..

This shows the rates (how much the govt pays per giltper year), the expiry dates and the price of the gilts. The yield is the return on the investment, which you can see is very low...

http://www.dmo.gov.uk/index.aspx?page=gilts/about_gilts

More on gilts.

ninky_2

Sir_Humphrey wrote: »

The bodies holding those bits of paper tend to be Central Banks, Pension Funds, Investment Funds and the suchlike. They are considered just about the safest sort of investment, which means the government does not have to pay much to people to hold them..

so if a government refused to honour them (which i guess in economic terms is even more unthinkable than the banks going bust), it would actually effect anyone and every institution (e.g. councils) with savings or related products (pensions)?