NS&I and UK Gov Bankruptcy

Gambler101

Gadfium wrote: »

:eek:

£1 Billion to a bunch of far-right, Young Earth Crationist believers in Norn Iron just so they could limp on in power for another few months would suggest otherwise.

£250 billion extra borrowing in year one of a Labour government puts the £1 Billion in perspective lol

antrobus

ColdIron wrote: »

How could they go bankrupt when they could just print their way out of it?

Because printing money willy-nilly simply wipes out the currency. The most recent example of country that follows this route would be Zimbabwe.

Tarambor wrote: »

As above. The UK owns its own currency so isn't in the situation Greece is in. The UK could pay off all its debts right now by instructing the Bank of England to print a £1.7 trillion bank note.

See above.

FatherAbraham wrote: »

Indeed, issuing index-linked bonds, and issuing bonds denominated in foreign currency, are about the only ways a state can get into an insolvent, dafaulting situation.

A state can't print its way out of problems in paying those, so they're some of the most dangerous financial instruments available.

Warmest regards,
FA

About a quarter of UK government debt is index-linked.

Uxb

For a more recent example than Zimbabwe check out the latest from the socialist nirvana of Venezuela for what happens when a government tries to print its way out of its overspending mess.
The currency collapses, inflation becomes measured in 1000% of percent and there is no food in the shops along with full scale riots on the streets.
Strange to report we don't hear much from Corbyn once a strong supporter of the Venezuelan government's policies..other than for Corbyn to hurriedly delete his previous comments from the web praising them.

http://www.express.co.uk/news/politics/834624/Venezuela-news-jeremy-corbyn-hugo-chavez-riots

colsten

Uxb wrote: »

Strange to report we don't hear much from Corbyn once a strong supporter of the Venezuelan government's policies..other than for Corbyn to hurriedly delete his previous comments from the web praising them.

There's at least two tweets still on his Twitter, praising Hugo Chavez, who laid the foundations for the present disaster.

https://twitter.com/jeremycorbyn/status/309065744954580992

https://twitter.com/jeremycorbyn/status/309275681500581889

And on Corbyn's Facebook:
https://www.facebook.com/permalink.php?story_fbid=10151476747983872&id=330250343871

Jeremy_Corbyn_in_2013 wrote:

Very sad news at death of Chavez; he will leave a huge legacy of a different power relationship in Latin America where the poor mattered and through ALBA health care and education came for the first time to many people - he is seen by millions as the real friend of the poorest and dipossesed. Hope his legacy will be the principles of social security and opportunities for all that can conquer poverty and share wealth.

Yep, he left a huge legacy. And if we aren't careful, we can have the same.

Malthusian

dividendhero wrote: »

NS&I used to issue index linked bonds, sadly not available to new investors - they'd be handy if Govt ever printed their way out of debt

If we were at the point where the Government was printing £1.7 trillion bank notes, inflation-linked coupons would be "temporarily suspended", to prioritise the stability of the economy and the welfare of hard-working comrades over greedy foreign investors. Or the bonds would be compulsorily and unilaterally converted into non-index-linked ones.

Obviously this would be a default, which printing money technically isn't, but the effect on the economy and the UK's credit rating would be the same, so it's an academic distinction.

Linton

Please dont turn this forum into an extension of the Debate one. Suggest you will find people more receptive to your prejudices there.

Linton

IMHO...

Printing money of itself doesnt cause inflation. The problems arise if the amount of money in circulation increases faster than the goods available - eg if a government wants to make people richer by large scale distribution of cash handouts or tax cuts. At the moment the statistics would appear to indicate that during the past 10 years excess cash isnt a situation that most people experienced, quite the reverse.

Most repayment of government debt never enters circulation - when a gilt matures the large scale buyers of gilts use the cash to buy new issues, they have little choice of what to use as an easily realisable safe repository of wealth. The government at the moment has no problem selling new gilts despite the very low interest rates.

So I dont see government debt as something to worry about, at least as far as things like the safety of NS&I is concerned.

A greater problem for investors could be the increasing level of personal debt which is very different in nature to government debt. People can and do go bankrupt or die with large unpaid debts. So I would be somewhat wary of P2P for example. But the effects of a large increase in failure to repay debt wont just affect individual lenders. For example it seems most new car purchases are now based on people being allowed to take on large debts. Should the lenders get worried there could be a major impact on a significant UK industry.

ColdIron

antrobus wrote: »

Because printing money willy-nilly simply wipes out the currency. The most recent example of country that follows this route would be Zimbabwe

The OP asked if the government went bankrupt and they suffered a 'haircut' whether they, as a creditor, would have some sort of lien via the taxation system. They would be returned every 'pound note' they had lent as the government would still be able to pay their debts, hence not bankrupt. The fact that it would be cheaper to burn the money than buy wood with it is a secondary and consequential issue

Aretnap

Neil001 wrote: »

Hey guys, I'd like a serious answer to a what if scenario. I've invested in NS & I, bonds and ISA. They claim 100% security. However with the UK's debt bubble on the wrong side of crazy, if the UK Government goes bankrupt and they decide to give a haircut to investors, do I become a creditor, and as a creditor would I then be entitled to withhold tax to the HMRC equivalent to the sum taken ?

To answer the actual question in the OP... no, in the (unlikely) event of the government defaulting on its debts you would just have to lump it; you would not be allowed to withhold tax.

Of course, the UK government actually defaulting on its debts (as opposed to inflating them away) implies a fairly dramatic set of circumstances, so you might get lucky and find that there is no equivalent of HMRC to charge you tax on whatever vegetables you manage to grow in the radioactive soil. You might still have a problem with roving Mad Max-style gangs demanding tribute, of course.

Glen_Clark

Gambler101 wrote: »

the Tories arnt reckless spenders!

Can we put the Daily Mail aside and look at the figures?
G Osborne increased our debt by more in one Parliament than all the Labour Governments put together.