Britain's debt and basic economics...

donaldtramp

Below I'll think you'll find many of the reasons why Britain, benefit claimants and the public sector are quite rightly going to get an absolute kicking after the general election. WHOEVER gets in. We are SKINT, BROKE and can no longer afford all of the luxuries of the above.
There is so much debt out there it is unbelievable. It is not the banks fault, the debts they brought on, are absolutely tiny when you look at the big picture. Below are some of the debts I came across, I haven't even noted things like the PFI off sheet Enron style accounting, I hope you get the picture.
We are ALL living way beyond our means and at some point (very soon) it will have to be reeled in.
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Forgive me I'm not an economist. I can't get things to add up. Can anyone help?
As I see it, we are in absolutely stupendous, monumental debt.

http://www.telegraph.co.uk/finance/financetopics/budget/7513...

Britain's national debt will rise to a record £1.4 trillion
So that's £1400 BILLION. Paying the interest on that debt could cost as much as £58 billion a year, more than annual spending on schools in England.
That doesn't seem to very wise.
So that's public sector debt.

Lets add on household debt. Because everyone in the UK "is worth it" aren't they? (If you believe the advertising...)
http://www.spectator.co.uk/coffeehouse/3078296/the-true-exte...

How much is Britain’s true national debt? Gordon Brown says 37% of GDP, the ONS says 43% of GDP – but this is just government debt. The reason Britain is in so much trouble is that our corporate and household debts are huge. It is the combination that makes us such a credit liability – but no one has ever put together a combination.

Until now.

Michael Saunders from CitiGroup has calculated ‘external debt’ – ie, what Britain owes the rest of the world. It is not 40% but 400% of GDP, the highest in the G7 by some margin. The next down, France, is 176%. America, flagellating itself for blowing such a debt bubble, is just 100%. Japan is about half America. The below graph shows ‘external debt’ – both in mid-2008, and five years ago.

400% of GDP now. Once again I'm not an economist but that doesn't look very prudent to me.

And the world knows about it (see next link) much longer are we going to get away with keeping our AAA credit rating? It would be a shame to lose that as we'd have to pay even more on our MASSIVE debt. Once again not quite grasping the wisdom here...

http://www.nytimes.com/2010/03/25/business/global/25welfare....
According to Nick Silver, an independent actuary who has studied Britain’s liabilities, the nation’s debt burden — including pension obligations and the cost of bailing out big banks — is actually 420 percent of G.D.P., twice the level of Japan, the world’s leading debtor.

Twice the level of Japan? I thought Japan went on to have a lost decade. Are we trying to have two lost decades? I wouldn't have thought that very sensible but as I have said, I'm not an economist.
Britain operates one of the largest welfare states in Europe. And that, it seems, is just fine with many of the British. ...

...Despite the worst recession since World War II, many people here show little appetite for shrinking a system that eats up half the nation’s economic output, more than in Portugal, Greece or Spain — all of which are trying to push through painful cuts. Indeed, as Britain’s Labour government confronts a yawning budget deficit, public sector workers are mobilizing to head off any reductions in wages or jobs.

So we have an already massive public sector (whilst we're here let's have a look at their bullet proof taxpayer guaranteed pensions shall we??)
http://www.iea.org.uk/record.jsp?ID=492&type=news

Treasury documents revealed that the official estimate of unfunded liabilities (on the Government’s own figures, which are much lower than the £1.1 trillion estimated by independent experts) has increased to £770 billion, up from the Government’s last published estimate of £650 billion.

That's another £1100 BILION and guess who has the liability for this? You've got it. The taxpayer.

So what does our government do? Increase the public sector of course!!!! Once again I'm not an economist, but to a non economist this would seem to be foolish! Am I missing something?
http://www.independent.co.uk/news/business/news/jobless-fall...
Since the start of 2008, private sector employment has fallen by more than 4 per cent, while the public sector has expanded by almost 6 per cent. Over the past year, some 46,000 jobs were created by the state; in the same period 527,000 jobs were lost in the private sector. Overall, the economy is still shedding jobs.

So we have expanded the non GDP creating sector whilst allowing the GDP creating manufacturing sector to wither. How will we pay all this debt back? Yet Unemployment has went down! Isn't that amazing. I don't understand all these economist tricks.
I believe a simple technique is to simply print more money and give our creditors that. Once again, not being an economist, I wouldn't want that money if I was a creditor. Am I missing something?

Yet despite this increase in public sector workers with all their taxpayer funded and guaranteed pensions, what are they promising?

STRIKES!!!
“We will not accept any cuts in pay,” said David Prentis, the general secretary of Unison, Britain’s largest public sector union, with a membership of 1.4 million. “That will lead to industrial action.”
If I can't grasp basic economics, forgive me, I am not even going to attempt to understand the great wisdom of the unions. Protected jobs, private sector being laid off, new public sector jobs, wage rises and that ever famous, taxpayer funded, bullet proof, taxpayer guaranteed, final salary pension.


But apparently everything is OK. Our chancellor has upped the first time buyers home allowance to £250,000. By doing so he can only hope to keep our massive housing bubble going. I couldn't possibly comment on that.

Can anyone explain economics to me. None of it seems to make any sense to me.

StevieJ

Did well on MF top the charts for a while, actually I didn't notice you answer this comment.

Wow, 8 posts into this thread, the opener to which is currently sitting on the top of the "Best of" list. and no-one has mentioned that if you are going to talk about debt you need to consider assets in the same breath.

I don't know how much I know about finance and economics but even I know that.

Andy

I don't know much about this but it seems that the other side of the balance sheet earned 45 billion, compared to 35 billion paid out, I guess that adds a little perspective.

Income
UK earnings on investment abroad increased by £4.4 billion to £45.2 billion, primarily due to higher earnings on direct investment abroad. Foreign earnings on investment in the UK decreased by £0.6 billion to £34.7 billion - this was due to lower earnings on other investment, which were partly offset by increases in earnings in foreign direct investment and portfolio investment

donaldtramp

if you are going to talk about debt you need to consider assets in the same breath.

That'll be the reason the pound has dropped against other companies,being warned about our AAA credit rating and the price it costs our government to borrow increasing.

I'd say the world has considered our asset/debt ratio it's pretty clear to see......

StevieJ

donaldtramp wrote: »

That'll be the reason the pound has dropped against other companies,being warned about our AAA credit rating and the price it costs our government to borrow increasing.

I'd say the world has considered our asset/debt ratio it's pretty clear to see......

I think the significant part of that line is AAA, BTW the USD/Stg was 1.05 in March 1984 under Maggie, so it is up 50% on that

amcluesent

The old folk are the lucky ones shuffling off this mortal coil; anyone still alive in around 10 years time will know only grim austerity, scrimping and getting by, grow-you-own, powercuts and living under the cosh of a para-military police acting on the say-so of a government of national emergency.

As all the assumptions about a comfortable lifestyle based on the 'never never' come crashing down, there will be millions of frightened, angry people demanding that something be done as they are jolted out of their la-la land of 'entitlement'. All too late, too late...

"A man, he’s like his father
Wishes he was never born
He longs for the time when the clock will chime
And he’s dead for evermore"

markharding557

This country and its living standards are in for a long long decline,i expect the average lifestyle to be very different in twenty years time.
To put it another way global business is not going to come back until we are competitive enough for them.

poppingjay

Forgive my naivety, but I have a couple of questions. Who does the government borrow money from? and what would happen if we defaulted on the debt - i.e. who would send the bailiffs/army round?

And, in this instance couldn't the government then just print it's own currency and spend our taxes on beneficial things? I suppose I'm under-complicating things here....:think:

Kohoutek

poppingjay wrote: »

Forgive my naivety, but I have a couple of questions. Who does the government borrow money from?

Banks, insurance companies, pension funds, central banks (including the Bank of England), foreign governments, and even UK citizens if you hold NS&I products for example.

poppingjay wrote: »

What would happen if we defaulted on the debt - i.e. who would send the bailiffs/army round?

The pound would lose most or all of its value relative to other currencies, probably leading to hyperinflation - the value of savings being wiped out, the UK being unable to import oil, food etc.

UK assets might be seized abroad in the jurisdictions of our foreign creditors.

poppingjay wrote: »

And, in this instance couldn't the government then just print it's own currency and spend our taxes on beneficial things? I suppose I'm under-complicating things here....:think:

Because we use a monetary system where money can be only created as debt.

http://video.google.com/videoplay?docid=-2550156453790090544#

poppingjay

Kohoutek wrote: »

Banks, insurance companies, pension funds, central banks (including the Bank of England), foreign governments, and even UK citizens if you hold NS&I products for example.



The pound would lose most or all of its value relative to other currencies, probably leading to hyperinflation - the value of savings being wiped out, the UK being unable to import oil, food etc.

UK assets might be seized abroad in the jurisdictions of our foreign creditors.



Because we use a monetary system where money can be only created as debt.

Thanks for your reply, the link looks interesting, I'm watching it now, so I will report back later

P.S I'm glad I've got a vegetable patch, this madness can't continue forever surely?

Pennywise

What bugs me is that a lot of people think that Labour's idea of "halving the deficit" means halving our borrowings. It doesn't. It just means halving the annual difference between income and outgoings. So the debt continues to rise, but at just half the rate as previously. That's their "solution" to the debt problem - not actually reducing the amount borrowed, but just borrowing more each year at a lower rate. Trouble is that people just aren't grasping how bad that is - even on the TV, the so-called "experts" aren't making it clear. There are genuine people thinking that our borrowings in four years time will be less than they are today - they won't - under plans of both the Torys and Labour, our debts will continue to rise for years to come. The expected cuts and tax rises won't be anywhere near enough to get us out of this mess. We need a coherent plan to zeroise the deficit within four years, not halve it, and then start to pay back the borrowings, i.e. run an annual surplus.

kennyboy66_2

Pennywise wrote: »

. We need a coherent plan to zeroise the deficit within four years, not halve it, and then start to pay back the borrowings, i.e. run an annual surplus.

There isn't a coherent plan, because it is next to impossible.

Cutting spending (or increasing taxes) by such an amount would plunge us back into servere recession.

Halving the deficit in 4 years will be hard enough, although I accept that it is only a start and that at the peak of an econmic cycle we should run a surplus.