Cameron Solves Debt Crisis

[Scunner]

Why pump more money into the economy to boost it - a far better idea is to make everything half price so we can afford to buy twice as much - this would mean all factories would have to make twice as many and have to take on loads of more staff, solving the unemployment problem and of course reducing the price of everything by 50% would solve rising inflation at a stroke.

It's so easy you do wonder why these toffee nosed snivelling idiots bother wasting their unearned money sending their grovelling, creepy little misfit junior snobs to Oxbridge and Eton. I suppose this is what we have come to expect from the party that can't deport a murderer because he hasn't finished his Mars bar.

[Ovacikpeedoff]

Shame, if it were only that simple.Maybe it is.

Today was one of the blackest days about the ecoonomy and while watching the news I did not know whether to laugh or cry. Item 1 was about the state of the the UK economy and the possibility of depression. Item 2 was about the argument between 2 senior members of the cabinet on whether a cat prevented prevented a Bolivian from being deported.

What is the country coming to and Have we lost the plot?

[tinkerman]

sold the plot more like

[corbindallas]

Ah a subject I love politics! I am astounded how short memory many voters have, or maybe they just don't care and vote traditionally? If a political party caused a problem to you, you don't vote them back in do you? This current dire financial situation was managed by the Labour Party and I use the term managed very loosely, it is now down to the Conservatives and dare I say the party that came 3rd in the last election to sort it out, and that is where part of the problem currently lies, the Conservative cannot take full fiscal control over their desire to tackle this situation. Labour solution is spend your way out of it (add to the debt) Conservative solution (pay off the debt asap) Liberal solution (sit on the fence but appear to support both and none). I was brought up if you have a debt you need to pay it off, better still try not to get into debt in the first place, so I support the Conservative stance in tackling this, knowing that with all the financial cuts made and proposed it is still not going to tackle the countries debt mountain as stands and growing daily, frightening isn't it.All this is also not helped by the media which joys on doom and gloom (invention) even when it is not so, I watch the Moody downgrade of the UK banks and Sky News say's it has caused a sharp collapse in Bank Share prices this morning, as I watch the FTSE is up and still rising and the bank shares are still positive riding on yesterday's gains, albeit negative on today's prices but half of what is being reported, so scare monger reporting. Just like Moody's official statement saying their downgrade makes no difference to the UK Bank's financial stability just reflecting their links into the European debt crises, this is not how the story get's put across though.It's a no wonder that no one is happy at the governments attempts to solve not going into a double dip recession if you rely on the media's take on everything! Relying on the media to report what is going to be said before it is said or reporting factual of a situation is as naiev as voting Labour back in to sort the problem they let happen in the first place! Alistair Darling or George Osbourne, I know who I prefer, as I said short memories!

[Colwyn]

Some politicians like to discuss the national economy as though it was just like the household writ large. Perhaps some economists explain their views in this way, but it is not the way that economists think or how they frame their own views. Some people may find the household analogy useful but I find it fundamentally unhelpful in understanding national and international economies. Perhaps a couple of examples will highlight its inadequacies.

Yesterday we saw the BoE going for another dose of quantitative easing. Although this doesn't actually mean physically rolling the presses to print more money (more like generating virtual computerized money) its impact is much the same. Essentially governments, in the short term, can pay their way out of trouble by creating more money. If I decided to follow suit and sort out my household budgets by printing money I would soon find myself looking at the world through iron bars. Message: households cannot act like governments.

Cameron has introduced the credit card into the argument. I pay off my card in full at the end of every month, always have done (yes, I'm of that generation that saved up to buy things). But if I did have a large credit card debt I would take advantage of all those 0% interest on balance transfer offers, and move the debt on to the next bank when the introductory period finished. Paying 0% interest for your money when inflation is running at 5%-ish is a bloody good deal. Governments don't have this opportunity. Message: governments cannot act like households.

So, I am very suspicious of the household analogy; the assumption that individual action and societal action are equivalents. I am pleased to see how often politicians find that the analogy trips them up - from Harold Wilson's notorious "the pound in your pocket" speech to the current dither and spin about Cameron's "credit card" speech.

[Ovacikpeedoff]

Colwyn living within your means applies to a country as with any household.You cannot continue to roll up debt. The interest payments on UK debt is in excess of £42 billion a year. That amount has to come from tax revenues which are about £450 billion. So 10% of all the tax we pay goes out in interest and this equates to nearly half the NHS budget.

Your argument against Camerons credit card is flawed and actually contraadicts what you are trying to say. The government does not have the luxury of being able to select interest free period credit deals. They have to pay the market rate and that rate is determined by the probability of default. The higher the risk the higher the return. Italy is a prime example. It is percieved that the probability of default is high and that is why the Italian bond yields are now way above the 7% mark. This is the level that is the maximum that a country can afford for credit.Thus investors like to see the lowering of government debt.

The model of comparing individualsand household to government spending is not a drastically different as you say it is.The mechanics available may be more complicated but it still comes back to fundementals of you must live within your means.

[Colwyn]

quote:Originally posted by Ovacikpeedoff

Your argument against Camerons credit card is flawed and actually contraadicts what you are trying to say. The government does not have the luxury of being able to select interest free period credit deals.

I thought that was what I was trying to say when commenting  "Governments don't have this opportunity. Message: governments cannot act like households". I wonder if I have lost the ability to communicate effectively. Or perhaps you skipped reading this bit.

I don't really how saying "living within your means applies to a country as with any household" adds anything to our understanding of economies; it is merely a simplified homily. I am not even sure it is true since it is so vague. If we introduce a time dimension into the analysis things become more complicated. Are you saying that countries and households live within their present means? I would have thought this to self-evidently false. Many countries and individuals rely upon credit and in effect borrow against the future. So we might say they must live within their anticipated future means - i.e. at some day in the future they will be able to payoff their debts, or at least maintain the interest payments. Even this may be too vague. Perhaps we should be saying that people/countries should live within reasonable expectatons of what their future means will be, and not absurb optimism of "something will turn up". Then that brings with it a whole set of issues about what "reasonable" means - or just fed up with all of this and go and do something else instead.

[Ovacikpeedoff]

I live in the real world where the majority do not have the luxury of being able to switch credit cards as and when they please. Switching credit cards is just a temporary solution to debt problems. When you apply for credit your previous history is checked and constant switching is noted. Eventually the balance gets to a stage where you become a serious risk and credit will not be given or given at a higher rate. It still boils down to be being able to manage your paymets. If you have an income of £20k a year and you are spending £25k you are running up debt and it cannot be sustained over the medium to long term. You will get very little satisfaction from the bank if you go looking for a loan and tell them it is alright as I expect to earn £50k next year. You calculate debt on the ability to be able to pay on your current income.If you were really prudent you would calculate your level of borrowing on a worst case scenario. If you are expecting to lose your overtime you slim your budget back to cover such events. For example, you would cancel your luxury spending like the gym membership or the sky subscriptions. You would not just go and continue spending.

The last budget by Darling proposed spending of £671 billion against £498 billion of tax revenues. This leaves a hole of about £180 billion.So approximately a third of spend would have to be borrowed. Who has to pay the £1.1 trillion debt that the country has.It will not be any of us on here it is future generations that will be lumbered with it.

Your proposal of spend against future income is what Brown and darling did and look what it did to the economy. The problem is when you start to spend beyond your means you create expectation. You cannot give all of these handouts and then the next year take them away because we had not achieved the revenues expected. That is political and economic suicide.

[desmartinson]

quote:Originally posted by Highlander

quote:Originally posted by desmartinson

Well said Fiona, the one thing Blair and Brown did for me was they made up my mind to get out of Britain,so sad to have to leave your country, but just couldnt stand being screwed anymore, so much for the working mans party.

Des - I was wondering if you would care to expand/explain that in a little more detail please

not really John, but screwing my final salary pension after working for 46 years(never unemployed and never claimed a penny off the state)didnt help, the only thing i know in my time is every labour government increases income tax even if it is called something else,and i was always better off under the torys.

 Watch this space now John

[usedbustickets]

OPO once again you do not bring anything new to the debate.  You simply bang on repeating the same old homespun mantras such as 'living with in means' or simplistic Micawber like statements on income and outgoings leading to happiness or misery. All of which continues to demonstrate an untutored understanding of the economics of a modern complex national economy operating in an even more complex world economy.

So I am thinking about putting together a short economics reading list for you. Which I hope will enlighten not only your understanding of the subject, but more importantly will enrich your thinking and ideas about the great imprecise science.