Steve
Hero Protagonist
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Post by Steve on Sept 12, 2024 12:14:51 GMT
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Post by Zany on Sept 13, 2024 17:16:07 GMT
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Post by ammonite on Sept 14, 2024 15:48:42 GMT
If the Public borrowing could be brought under control NOW, or within the next year or so, then this wont happen.
The July borrowing figure was 3.1 Billion, which fully supports the claim that there is something like a £20 Billion black hole in the nations finances.
We all knew that there were difficult times ahead, we were told this during the election campaign, but IF (and I admitt its a big IF) the government can (1) close the deficit and then (2) bring about growth, there will be a brighter future.
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Post by Zany on Sept 14, 2024 16:09:36 GMT
If the Public borrowing could be brought under control NOW, or within the next year or so, then this wont happen. The July borrowing figure was 3.1 Billion, which fully supports the claim that there is something like a £20 Billion black hole in the nations finances. We all knew that there were difficult times ahead, we were told this during the election campaign, but IF (and I admitt its a big IF) the government can (1) close the deficit and then (2) bring about growth, there will be a brighter future. Welcome to the forum Ammonite. I would be happy to see debt grow a bit more if it helps smoot out the current issues. At the moment we have enormous waiting lists and a huge amount of people unable to contribute towards the economy. We have terrible roads causing delays in transport and our infrastructure needs much improvement.
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brownlow
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Post by brownlow on Sept 16, 2024 21:18:42 GMT
The OBR notes that the drivers of increased public spending will be
- an ageing population, with a falling birth rate and the ‘baby-boom’ cohorts moving through retirement putting downward pressure on revenues and upward pressure on spending;
- climate change, including the fiscal costs of completing the transition to net zero while also coping with damage from rising temperatures and more severe weather;
- and rising geopolitical tensions, with both the previous and current UK Governments aspiring to raise defence spending to 2.5 per cent of GDP.
That is, real physical costs, not caused by public spending. Cutting public spending will not cure them, and would likely exacerbate at least two of them. The projection that interest payments on govt debt will eat up a runaway proportion of GDP by the 2070s appear to be based on current rates of interest and GDP growth. Even good forecasters can't know what they'll be in 50 years time, and the OBR has a terrible forecasting record, even over 1 year. As the OBR concedes, it could be averted if we could just restore GDP growth to pre-GFC rates. That said, those costs will be inflationary, which would normally mean central banks raising interest rates. If interest on govt debt does eat up a runaway proportion of GDP, something will indeed "have to give". And that something will be the 'full funding rule' - see section 2.13 here - that government should match its net (deficit) spending with bond issuance. A fiscal rule which govt imposes on itself in normal times (if govt would otherwise simply run out of its own currency, there would be no such rule). As in previous crises - i.e. not normal times - the rule will either be suspended, or circumvented by central banks buying the bonds at its chosen price floor. But won't that cause a run on the pound?!! No, because the drivers are global and will affect all currencies. Any government stupid enough to try and balance its budget in such conditions (that'd probably be a British one) would find its GDP shrinking faster than its debt, and soon find itself out of government.
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Post by dappy on Sept 16, 2024 21:28:23 GMT
How to cope with the twin massive threats of the ageing population and climate change is an issue facing all Western countries. Not sure we have even begun to work out how to cope. Don’t think simply spending more money than we earn in tax ad Infinitum is a realistic strategy - if it is let’s just abolish tax altogether - but equally can’t see how realistically the gap can ever be closed. Overlay that with impact of climate on other countries and regions and what that might mean for populations there plus who knows what other crises and it is a little hard to see a positive future. Glad I was born when I was to be honest.
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brownlow
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Post by brownlow on Sept 16, 2024 22:35:54 GMT
Govt spending infinitely more than tax revenues isn't realistic, and no one's suggesting it.
Govt continuously spending, on average, more than tax revenues is a necessity - as is ramping up net spending in crises. Plenty rich countries, including this one, have been doing it for centuries.
Countries with trade surpluses can maintain govt surpluses (and even they mostly don't); countries with trade deficits cannot.
Tax payers cannot create money - not even Bill Gates. If you buy something for £100, you're down £100 and the vendor is up £100. All the transactions in the economy sum to zero. For a money economy to grow, there must be a source of additional money (otherwise you have deflation) and the only legal sources are net ("deficit") govt spending and commercial bank credit licensed by govt:
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Post by Zany on Sept 17, 2024 6:58:27 GMT
Govt spending infinitely more than tax revenues isn't realistic, and no one's suggesting it.
Govt continuously spending, on average, more than tax revenues is a necessity - as is ramping up net spending in crises. Plenty rich countries, including this one, have been doing it for centuries.
Countries with trade surpluses can maintain govt surpluses (and even they mostly don't); countries with trade deficits cannot.
Tax payers cannot create money - not even Bill Gates. If you buy something for £100, you're down £100 and the vendor is up £100. All the transactions in the economy sum to zero. For a money economy to grow, there must be a source of additional money (otherwise you have deflation) and the only legal sources are net ("deficit") govt spending and commercial bank credit licensed by govt:
The only real way to create more money in a country (Unless you have assets to sell to other countries) is to increase the population, more people buying and selling. But this just increases costs as well.
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Post by dappy on Sept 17, 2024 9:02:02 GMT
Money when you try to think about it is an extraordinarily difficult subject to fully comprehend. If the argument is that governments can’t run at a surplus or balance but have to run a deficit but the deficit can not be unlimited, the obvious question is what level should that deficit be? Is it possible, in a world where humanity’s greed has put in jeopardy much of life on the planet in the course of at most 200 years, to pursue yet more growth? Ignoring inflation, if interest is to be paid on debt , then as debt rises interest cost must rise with it compounding the critical gap between spending and tax. How can this be avoided?
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Post by equivocal on Sept 17, 2024 9:03:39 GMT
Govt spending infinitely more than tax revenues isn't realistic, and no one's suggesting it.
Govt continuously spending, on average, more than tax revenues is a necessity - as is ramping up net spending in crises. Plenty rich countries, including this one, have been doing it for centuries.
Countries with trade surpluses can maintain govt surpluses (and even they mostly don't); countries with trade deficits cannot.
Tax payers cannot create money - not even Bill Gates. If you buy something for £100, you're down £100 and the vendor is up £100. All the transactions in the economy sum to zero. For a money economy to grow, there must be a source of additional money (otherwise you have deflation) and the only legal sources are net ("deficit") govt spending and commercial bank credit licensed by govt:
I understood because of the way central bank reserves are dealt with when, say, insurance companies or pensions funds buy government bonds, deficit spending 'financed' through domestic bonds does not increase the money supply. I guessed that on the sectoral balance model the trade deficit (subject to currency fluctuations) was balanced in the round through government bonds issued to foreign investors and ignoring other BoP entries.
Am I missing something obvious?
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Steve
Hero Protagonist
Posts: 3,373
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Post by Steve on Sept 17, 2024 9:04:04 GMT
Govt spending infinitely more than tax revenues isn't realistic, and no one's suggesting it.
Govt continuously spending, on average, more than tax revenues is a necessity - as is ramping up net spending in crises. Plenty rich countries, including this one, have been doing it for centuries.
Countries with trade surpluses can maintain govt surpluses (and even they mostly don't); countries with trade deficits cannot.
Tax payers cannot create money - not even Bill Gates. If you buy something for £100, you're down £100 and the vendor is up £100. All the transactions in the economy sum to zero. For a money economy to grow, there must be a source of additional money (otherwise you have deflation) and the only legal sources are net ("deficit") govt spending and commercial bank credit licensed by govt:
It's not about creating money per se, it's about creating GDP which a healthy money supply then follows. Try it the other way round and you get inflation problems. And the concern in that report is not that government debt will increase but that the Debt:GDP ratio will treble making that debt unserviceable leading to economic collapse with the inevitable societal collapse following.
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Post by AvonCalling on Sept 17, 2024 10:57:14 GMT
Isn't a significant part of the problem that we are not paying enough tax for the standard of living that we expect/want? I seem to recall that when I started working income tax was around 25% and that since then it has gone down and all political parties want to avoid increasing tax back to those levels at all costs. So to me (and of course I could or probably am wrong) it seems that we all want Boris' cake and to eat it. Maybe we need to grow up and get real.
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Steve
Hero Protagonist
Posts: 3,373
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Post by Steve on Sept 17, 2024 12:10:33 GMT
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Post by Zany on Sept 17, 2024 19:41:53 GMT
Govt spending infinitely more than tax revenues isn't realistic, and no one's suggesting it.
Govt continuously spending, on average, more than tax revenues is a necessity - as is ramping up net spending in crises. Plenty rich countries, including this one, have been doing it for centuries.
Countries with trade surpluses can maintain govt surpluses (and even they mostly don't); countries with trade deficits cannot.
Tax payers cannot create money - not even Bill Gates. If you buy something for £100, you're down £100 and the vendor is up £100. All the transactions in the economy sum to zero. For a money economy to grow, there must be a source of additional money (otherwise you have deflation) and the only legal sources are net ("deficit") govt spending and commercial bank credit licensed by govt:
It's not about creating money per se, it's about creating GDP which a healthy money supply then follows. Try it the other way round and you get inflation problems. And the concern in that report is not that government debt will increase but that the Debt:GDP ratio will treble making that debt unserviceable leading to economic collapse with the inevitable societal collapse following. That's one very big step Steve.
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Post by Zany on Sept 17, 2024 19:44:38 GMT
Every now and then Steve you remind me how close our views are.
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