National debt, and an immensely stupid question ...
Discussion
Chaps,
I hope you are sitting down. I am about to ask a question which could have you rolling on the floor with laughter ...
Why do we have a national debt?
No, I'm not looking for answers to do with giving money to dole-ites, the labour government pissing it all away on immigrants and muslims and people with bad backs and all the rest of it - I'm asking where it all started? Was there ever a time when we didn't have a national debt? Does every country have a national debt? Will we ever pay back our national debt? (If it really is nigh on £40k per family, we will never pay it back - surely? The interest rates alone will cause it to carry on getting higher ... and where does that leave us?)
Please explain in simple terms, to someone who is a bit fick and not very good at economics and all that. If I was to look at my personal bank statement and see a debt on it, I would be looking at ways to get rid of that debt. I know that people can exist without debt, so can countries exist without debt?
Ready to laugh? OK, now is your opportunity. Thanks for holding off 'till this point.
Oli.
I hope you are sitting down. I am about to ask a question which could have you rolling on the floor with laughter ...
Why do we have a national debt?
No, I'm not looking for answers to do with giving money to dole-ites, the labour government pissing it all away on immigrants and muslims and people with bad backs and all the rest of it - I'm asking where it all started? Was there ever a time when we didn't have a national debt? Does every country have a national debt? Will we ever pay back our national debt? (If it really is nigh on £40k per family, we will never pay it back - surely? The interest rates alone will cause it to carry on getting higher ... and where does that leave us?)
Please explain in simple terms, to someone who is a bit fick and not very good at economics and all that. If I was to look at my personal bank statement and see a debt on it, I would be looking at ways to get rid of that debt. I know that people can exist without debt, so can countries exist without debt?
Ready to laugh? OK, now is your opportunity. Thanks for holding off 'till this point.
Oli.
Remember, only use small words, and start from the beginning. Thanks.
NoNeed said:
It got bad during the war, with nothing much done till thatcher started repaying and it's gone up ever since mostly due topoliticians buying votes of thick voters that think it's free money.
Actually thinking about it, to some of the more fecklesss in society it is free money.There's no votes in paying down a debt that doesn't really figure on the GP's radar
But plenty of votes to be lost in taking the actions the above task would entail.
If 'national debt repayments' were a figure itemised on income tax statements, there might be a bit more public pressure to tackle it.
But plenty of votes to be lost in taking the actions the above task would entail.
If 'national debt repayments' were a figure itemised on income tax statements, there might be a bit more public pressure to tackle it.
Dunno mate! but I do know that the U.K. has only, within the last few years, just paid off our debt to our American friends. Our contribution in achieving World Peace bringing an end to WW11 came at quite a hefty human price of course, the price tag was also hefty as you might imagine. Prior to that we had WW1, another huge price upon the Nation.Since WW1 we have been in debt thanks to the waste of war. Wait for proper analytical report of the better informed now.
The government just borrows money from people, and pays a sort of "interest" before returning the money after an agreed term, and the UK is one of the most safest places to put money as it has never defaulted on debt
According to Wikipedia the annual cost of servicing the debt is 3% of GDP
So we are basically someone who has run up a reasonable credit card bill but has a good, secure job, would love to pay off the bill at some point, but can't really be bothered and doesn't really miss the 3% each year.
According to Wikipedia the annual cost of servicing the debt is 3% of GDP
So we are basically someone who has run up a reasonable credit card bill but has a good, secure job, would love to pay off the bill at some point, but can't really be bothered and doesn't really miss the 3% each year.
When we swapped an unbacked or gold backed money system for a debt backed money system. You cant have money without debt or debt without money in such a system.
Debt itself isnt the problem. Debt that increases ahead of growth however is, as been happening in the US and UK since the late 60s/early 70s.
Debt itself isnt the problem. Debt that increases ahead of growth however is, as been happening in the US and UK since the late 60s/early 70s.
NoNeed said:
It got bad during the war, with nothing much done till thatcher started repaying and it's gone up ever since mostly due topoliticians buying votes of thick voters that think it's free money.
Repaying is a misnomer. Thatcher never reduced national debt in nominal terms, and only reduced it in real/adjusted terms by getting the private sector to increase its respective debt load ahead of govt. As we've seen with the bank bailouts, that doesnt remedy the problem as ultimately govt will always take over private debt's too.
thegman said:
Good link.It started with wars. Modern income tax came in as a precursor to the wars with Napoleon.
Could the UK ever go back to gold based currency instead of debt based currency?
I don't know much about the above, went looking.
http://en.wikipedia.org/wiki/Criticism_of_fraction...
hollydog said:
And now we have the olympics which we have borrowed to put on. Now here's an other one for you did we get the olympics fairly or did we get it cause uk is the only place that could afford it in this economic climate.Sorry moving away from the original question .
The Olympics 2012 venue was selected prior to the 2008 financial crash. 12gauge said:
When we swapped an unbacked or gold backed money system for a debt backed money system. You cant have money without debt or debt without money in such a system.
Debt itself isnt the problem. Debt that increases ahead of growth however is, as been happening in the US and UK since the late 60s/early 70s.
We had a national debt long before we came off the gold standard.Debt itself isnt the problem. Debt that increases ahead of growth however is, as been happening in the US and UK since the late 60s/early 70s.
zcacogp said:
Chaps,
Why do we have a national debt?
To put it as succinctly as possible, because for n number of years the govt has spent more than it has taken in via taxation. The debt is the total summation of the money the Govt still owe.Why do we have a national debt?
How does the Govt service this debt? By issuing bonds which are bought by instutional investors/pension funds etc. the bonds have varying maturities (when it is time to repay the bond), and what tends to happen is the Govt of the day will issue new bonds to cover payments for older bonds that are maturing. Thus, debt tends to hang around in perpetuum (and increases somewhat exponentially during recessions).
Part of the reason why our present bond yields (the return you get on a bond) are relatively low is because the average maturity is around 13yrs. Many other countries (the US & France amongst them) face a far worse position.
Hope that helps in some small way
Why do we have a national debt? Most of the reason for it is funding wars, where we've needed money quickly. We've then spent a long time paying it off.
Think about this as if your boiler exploded at home and you had to take out a loan to fix it. An unexpected large expense that can't reasonably be planned for without putting a lot of money into the bank and having to live on baked beans.
That's no problem so long as you don't have a structural deficit (essentially meaning you can afford all of your expenditure and the interest payments), and we've only had a structural deficit quite recently.
What we're doing now is equivalent to paying off a credit card with a credit card. Fortunately we're still getting low interest deals.
Think about this as if your boiler exploded at home and you had to take out a loan to fix it. An unexpected large expense that can't reasonably be planned for without putting a lot of money into the bank and having to live on baked beans.
That's no problem so long as you don't have a structural deficit (essentially meaning you can afford all of your expenditure and the interest payments), and we've only had a structural deficit quite recently.
What we're doing now is equivalent to paying off a credit card with a credit card. Fortunately we're still getting low interest deals.
essayer said:
The government just borrows money from people, and pays a sort of "interest" before returning the money after an agreed term, and the UK is one of the most safest places to put money as it has never defaulted on debt
According to Wikipedia the annual cost of servicing the debt is 3% of GDP
So we are basically someone who has run up a reasonable credit card bill but has a good, secure job, would love to pay off the bill at some point, but can't really be bothered and doesn't really miss the 3% each year.
We bloody well do miss it... look at the state of the armed forces. They only get 2.5% of our gdpAccording to Wikipedia the annual cost of servicing the debt is 3% of GDP
So we are basically someone who has run up a reasonable credit card bill but has a good, secure job, would love to pay off the bill at some point, but can't really be bothered and doesn't really miss the 3% each year.
crankedup said:
Dunno mate! but I do know that the U.K. has only, within the last few years, just paid off our debt to our American friends. Our contribution in achieving World Peace bringing an end to WW11 came at quite a hefty human price of course, the price tag was also hefty as you might imagine. Prior to that we had WW1, another huge price upon the Nation.Since WW1 we have been in debt thanks to the waste of war. Wait for proper analytical report of the better informed now.
Don't forget of course that nearly 50% of the gold we shipped to Canada to pay bills during the war was spent paying french debt so companies would honour our orders. Obviously the french gold we also shipped over couldn't be used or given to us in repayment. Gotta love the frogs ain't ya?The concept of "government debt" started in 1694.
England had suffered a naval defeat at the hands of the French in 1690, and badly needed to build new ships. These ships were needed for both military and commercial purposes. However, the government/King William did not have the necessary funds.
A group of people got together and formed "The Bank of England". They loaned the King £1.2m at a rate of 8%.
New ships were built and England regained control of the seas. This was very important for trade because piracy was widespread at the time. As international trade grew, England became prosperous, and the original debt was easily repaid.
That is how the concept of government debt came into existence.
Roll on 250 years, and governments decided that debt could be used to fund welfare as well as infrastructure. Spending on infrastructure enables economic growth, which makes it easy to pay the interest. Spending on welfare has a much smaller effect on the economy.
That is why we are in the current mess.
Don
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England had suffered a naval defeat at the hands of the French in 1690, and badly needed to build new ships. These ships were needed for both military and commercial purposes. However, the government/King William did not have the necessary funds.
A group of people got together and formed "The Bank of England". They loaned the King £1.2m at a rate of 8%.
New ships were built and England regained control of the seas. This was very important for trade because piracy was widespread at the time. As international trade grew, England became prosperous, and the original debt was easily repaid.
That is how the concept of government debt came into existence.
Roll on 250 years, and governments decided that debt could be used to fund welfare as well as infrastructure. Spending on infrastructure enables economic growth, which makes it easy to pay the interest. Spending on welfare has a much smaller effect on the economy.
That is why we are in the current mess.
Don
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