Chancellor on course to hit targets

oldvicar

lvader wrote: »

The cost of the debt is dependant on the interest rate we pay, Italy and Spain pay nearly twice as much as us for their debt. That is why we needed to deal with the deficit as a matter of urgency. Labours plan is nonsense.

And the UK borrows over much longer timescales than the continentals, so we're locking in our low borrowing rates for years and years to come.

ILW

Cannot see how if as a country we had spent a little less over the last decade or on the state and been in a position of owing zero, that anyone can see that would have been a bad thing.

IronWolf

Degenerate wrote: »

That one statement reveals such a profound lack of economic understanding I don't know what else to add. Is that you, George?

Ok Mr economics expert, please explain why GDP is so important in contrast to debt. GDP is just a measure of spending, all that money could be being p*ssed away, its meaningless. Its like a company saying they made losses of £200m, but its ok because its just 5% of our revenue, next year we'll increase revenue and then the £200m loss will only be 4%. Who cares if its 5% or 4%, all that matters is its a £200m loss.

All that matters to the deficit is tax revenues and spending. If the deficit goes down in £ terms, then thats good, if it goes up in £ terms then thats bad, regardless of if its a lower % of GDP.

Degenerate

IronWolf wrote: »

Ok Mr economics expert, please explain why GDP is so important in contrast to debt. GDP is just a measure of spending, all that money could be being p*ssed away, its meaningless. Its like a company saying they made losses of £200m, but its ok because its just 5% of our revenue, next year we'll increase revenue and then the £200m loss will only be 4%. Who cares if its 5% or 4%, all that matters is its a £200m loss.

All that matters to the deficit is tax revenues and spending. If the deficit goes down in £ terms, then thats good, if it goes up in £ terms then thats bad, regardless of if its a lower % of GDP.

OK, so now we've established that you don't have a clue what GDP is. By all means, keep digging...

Thrugelmir

Degenerate wrote: »

OK, so now we've established that you don't have a clue what GDP is. By all means, keep digging...

GDP and growth is the mantra of politicians. What effect or impact does it have on the average joe public in their daily lives? Very little I'm afraid to say.

macaque_2

Graham_Devon wrote: »

Seems strange to report that a government financial plan is actually working!

This really IS good news.

http://www.guardian.co.uk/business/2011/oct/21/government-borrowing-september-budget-deficit

I agree it's good news but it is the financial equivalent of chemotherapy however (and necessary for all that). The question is; How is the nation going to react when their hair starts falling out?

IronWolf

Degenerate wrote: »

OK, so now we've established that you don't have a clue what GDP is. By all means, keep digging...

I think it's you that doesn't really understand what it is. Let me help you

GDP = private consumption + gross investment + government spending + (exports − imports)

Basically how much is spent in an economy, so what's so important about measuring the budget deficit as a % of GDP?

I guess you can't answer the question otherwise you would have by now

Degenerate

IronWolf wrote: »

I think it's you that doesn't really understand what it is. Let me help you

(translation: I've just been reading Wikipedia)

GDP = private consumption + gross investment + government spending + (exports − imports)

That's one way of deriving the figure. Another is to derive it from income, which produces the same figure (allowing for measurement errors), as it's a zero-sum equation.

There is also a "production" method of calculating GDP that may produce different figures, but is attempting to measure the same thing.

Point being, GDP is not a "measure of spending", as you put it. It's a measure of economic production that can be derived several different ways.

Basically how much is spent in an economy, so what's so important about measuring the budget deficit as a % of GDP?

Because the nominal value of debt is irrelevant, it's the capacity to repay it that counts, and potential tax revenues increase with GDP. If GDP is growing at a faster rate than borrowing, our capacity to repay increases even as the debt does. That's before you even consider the effect of inflation shrinking outstanding debt whilst GDP growth figures are inflation-adjusted.

You're thinking like the national debt is something that has to be paid off. It hasn't been for centuries. It just needs to be serviced and rolled-over, and it's the cost of doing that that we need to worry about. If our nominal debt doubles over a period of time but our GDP quadruples over the same period, should we be concerned?

A moderate rate of growth combined with moderate inflation can halve a country's debt/GDP burden in 20 years, even with running a small deficit and therefore continually adding to the debt.

I guess you can't answer the question otherwise you would have by now

I was just giving you enough rope to hang your argument. There's little point in debating with someone who's level of understanding leads them to such a fundamental error. By challenging the basics like this, you're just embarassing yourself. Debt to GDP is accepted as the relevant measure by all competent mainstream economists.

It was about three years ago, when the boy George started using nominal figures to talk about the national debt being "the biggest it's ever been" (the nominal figure almost always is, even when we're doing well), that I turned against Tory economic policy. At the time I thought he was just being dishonest, but subsequent events led me to conclude he really is that incompetent, and utterly out of his depth.

ILW

Degenerate wrote: »

(translation: I've just been reading Wikipedia)


That's one way of deriving the figure. Another is to derive it from income, which produces the same figure (allowing for measurement errors), as it's a zero-sum equation.

There is also a "production" method of calculating GDP that may produce different figures, but is attempting to measure the same thing.

Point being, GDP is not a "measure of spending", as you put it. It's a measure of economic production that can be derived several different ways.


Because the nominal value of debt is irrelevant, it's the capacity to repay it that counts, and potential tax revenues increase with GDP. If GDP is growing at a faster rate than borrowing, our capacity to repay increases even as the debt does. That's before you even consider the effect of inflation shrinking outstanding debt whilst GDP growth figures are inflation-adjusted.

You're thinking like the national debt is something that has to be paid off. It hasn't been for centuries. It just needs to be serviced and rolled-over, and it's the cost of doing that that we need to worry about. If our nominal debt doubles over a period of time but our GDP quadruples over the same period, should we be concerned?

A moderate rate of growth combined with moderate inflation can halve a country's debt/GDP burden in 20 years, even with running a small deficit and therefore continually adding to the debt.


I was just giving you enough rope to hang your argument. There's little point in debating with someone who's level of understanding leads them to such a fundamental error. By challenging the basics like this, you're just embarassing yourself. Debt to GDP is accepted as the relevant measure by all competent mainstream economists.

It was about three years ago, when the boy George started using nominal figures to talk about the national debt being "the biggest it's ever been" (the nominal figure almost always is, even when we're doing well), that I turned against Tory economic policy. At the time I thought he was just being dishonest, but subsequent events led me to conclude he really is that incompetent, and utterly out of his depth.

Do you think the country would be in a weaker or stronger position if there was no national debt?

IronWolf

Degenerate wrote: »

(translation: I've just been reading Wikipedia)


That's one way of deriving the figure. Another is to derive it from income, which produces the same figure (allowing for measurement errors), as it's a zero-sum equation.

There is also a "production" method of calculating GDP that may produce different figures, but is attempting to measure the same thing.

Point being, GDP is not a "measure of spending", as you put it. It's a measure of economic production that can be derived several different ways.

Uhm, yes it is a measure of spending, do you need me to paste the equation again? Its not a measure of production, its a measure of the prices of everything produced. I see you need to read those wiki pages more carefully.

Because the nominal value of debt is irrelevant, it's the capacity to repay it that counts, and potential tax revenues increase with GDP. If GDP is growing at a faster rate than borrowing, our capacity to repay increases even as the debt does. That's before you even consider the effect of inflation shrinking outstanding debt whilst GDP growth figures are inflation-adjusted.


You're thinking like the national debt is something that has to be paid off. It hasn't been for centuries. It just needs to be serviced and rolled-over, and it's the cost of doing that that we need to worry about. If our nominal debt doubles over a period of time but our GDP quadruples over the same period, should we be concerned?

Now who's showing their lack of knowledge. Im talking about the deficit, not the debt, so yes the nominal £ amount is very relevant, because it means you are spending more than you receive in tax revenue.

You see in the calculation of the deficit, you include tax revenue, and if it decreases, your deficit increases. So you see there's no use in making it a % of GDP.