Is there an alternative to the government going bust?

[ElvisPenhaligon]

So. The government aren't getting to grips with "the deficit". They are most certainly not looking like getting to grips with their spending.

This would suggest that at some point, the interest payments on the debt are likely to become unmanageable.

It would also suggest that the viability of repayment may make it less of an attractive thing to potential investors.

I can't see how the country can't avoid going bust.

So, if they don't get to grips with spending and they can't raise taxation (due to the old laffer relationship) what can they do in order for the st not to hit the fan?

My chum said "Well, all the main players are in a similar boat" which is not a valid point.

What is the real solution they will use, no matter how nasty....

[heppers75]

Actually boils down to a very simple equation that every business lives and dies by.

If you can't increase revenue you have to cut costs.

The arguments arise as to where and how you achieve that especially in something with such a complex operating structure as a nation state.

[roachcoach]

I've said it before and I'll say it again.

Legalise (some) drugs.


Let's face it, whomever does what is necessary to save the balances of country will not be re-elected for a loooooooong time.

So MTFU and do what is necessary.


Near instant increase in employment
Near instant massive revenue hike
Significant tourism increase

MASSIVE spending savings on the "war on drugs" or potentially flat spending and the resources more gainfully employed, either way it's a win.

Loads of up sides, loads.

And then, obviously, absolutely instant and massive outrage in certain sectors, but frankly, fk them.


I await collapse of NHS/society/think of children complaints but the (imo) undeniable fact is it is a significant, hitherto untapped revenue stream.

[Miguel Alvarez]

Lol a very apt name.

[DJRC]

You hang on until the upswing of the financial cycle. The trick of course is to try and manage the downswing. Labour failed to do that quite badly, lumping the Torries with pretty much a very deep trough. Unfortunately CMD failed to have sufficient nerve to set the tone of the financial debate around the election time, fearing to paint as black a picture as it really needed to be painted to the electorate and as such he let Labour set the scope and tone. Of course over the last 3 yrs the scope of this mess has been revealed, but it now looks like some/much of it has come on CMD's watch. Due to the Tories not putting the argument across properly in the first place and letting Labour define the cuts issue, Boy George has never had the scope in his job description to do it properly and the Tories were further hampered by having to have a Coalition govt. which meant it had to be soft touch on the financials.

IF it had been done properly in the first place and CMD had some balls and Boy George actually was a decent Chancellor we would probably have cut 12months off the depths and lowlands of this financial butt-fking. But we havent, so 2012 will see us bumbling along the bottom before finally clawing our way upwards Xmas or so time this yr and next yr.

[roachcoach]

anonymous said:

[redacted]

It's an old handle from a long, long time ago, not drug related (not actually my poison of choice as it happens)


It may be a 'recycling' of cash, but it is tapping into a source the treasury has not gotten any part of yet. It takes out of the black market and pushes it into the mainstream and the revenue take is undeniable.

Sure, some dealers will see an income loss but the country as a whole would see a significant uplift.

It would act, effectively, as a new and significantly higher tax rate but people would see no difference as instead of the dealer, they buy in a store.

So someone spending £100 on drugs, today they government sees £0. If they changed this, they could see x% of £100. The money in the economy isnt changing but where it's going is.

It would need to be done alongside other measures, however a means to generate significant annual income shouldn't be ignored at a time when we need money.

In fact, whilst we're at it, legalise prostitution too.

[Digga]

Unsustainable.

IFS reckon government spending, as a proportion of GDP has increased more than fivefold since 1940's:http://www.ifs.org.uk/bns/bn25.pdf

Graph on page 2 is pretty terrifying IMHO, especially since in only goes as far as 2000.

[grumbledoak]

heppers75 said:

If you can't increase revenue you have to cut costs.

I like PH. Answer in post two, as it so often is.

But doing the only thing that will work will get you de-selected next time. We actually need a psychopath.

[Fittster]

ElvisPenhaligon said:

This would suggest that at some point, the interest payments on the debt are likely to become unmanageable.

How can that ever happen?

The only people in risk of going bust are people who lent the money, and risk goes with the territory.

[mattnunn]

roachcoach said:

I've said it before and I'll say it again.

Legalise (some) drugs.


Let's face it, whomever does what is necessary to save the balances of country will not be re-elected for a loooooooong time.

So MTFU and do what is necessary.


Near instant increase in employment
Near instant massive revenue hike
Significant tourism increase

MASSIVE spending savings on the "war on drugs" or potentially flat spending and the resources more gainfully employed, either way it's a win.

Loads of up sides, loads.

And then, obviously, absolutely instant and massive outrage in certain sectors, but frankly, fk them.


I await collapse of NHS/society/think of children complaints but the (imo) undeniable fact is it is a significant, hitherto untapped revenue stream.

A stoned work force is a happy workforce, as long as the work is trying to copy jimi hendrix guitar riffs and/or eating pot noodles.

[12gauge]

Only replacing the monetary system to one that isnt debt backed will prevent it.

Balls is right, you cant cut your way to growth, but Osbourne is also right, you cant borrow your way out of debt.

Or we could just accept that constant growth in a world of finite resources is a pretty stupid outdated concept anyway.

[oyster]

Government debt is 64%
Business debt is 100%
Personal debt is 106%
of GDP.


There's been lots of overspending going on. The government are just one of those who have.

[12gauge]

Fittster said:

How can that ever happen?

The only people in risk of going bust are people who lent the money, and risk goes with the territory.

We're the UK, not France. Our politicians would sell us out on a whim. I dont think anyone will get the greek Islands, but when default time comes, you can bet HM govt will be offering bits and bobs of our country in exchange.

You hold £500m of bonds Mr Sheikh, we cant pay in pounds, theyre worthless, but here, have the M25 instead and put some toll booths in.

That'll be about the sum of it...

[arguti]

DJRC said:

You hang on until the upswing of the financial cycle. The trick of course is to try and manage the downswing. Labour failed to do that quite badly, lumping the Torries with pretty much a very deep trough. Unfortunately CMD failed to have sufficient nerve to set the tone of the financial debate around the election time, fearing to paint as black a picture as it really needed to be painted to the electorate and as such he let Labour set the scope and tone. Of course over the last 3 yrs the scope of this mess has been revealed, but it now looks like some/much of it has come on CMD's watch. Due to the Tories not putting the argument across properly in the first place and letting Labour define the cuts issue, Boy George has never had the scope in his job description to do it properly and the Tories were further hampered by having to have a Coalition govt. which meant it had to be soft touch on the financials.

IF it had been done properly in the first place and CMD had some balls and Boy George actually was a decent Chancellor we would probably have cut 12months off the depths and lowlands of this financial butt-fking. But we havent, so 2012 will see us bumbling along the bottom before finally clawing our way upwards Xmas or so time this yr and next yr.

Very eloquent summary

[ElvisPenhaligon]

arguti said:

Very eloquent summary

This is all well and good assuming it's a part of the usual business cycle.

Oddly enough, we are not seeing the usual weeding out of dead wood and "green shoots". It appears from my perspective (on a few industrial estates and in communication with others who are across the country) that it is still bloody hard out there. It's a little more pervasive that the usual "breathing" of the system. There are several aspects of it which are very very poorly indeed, namely the financial and government aspect of it.

I wasn't really around in the 80's but can remember my parents watching "the money programme" and being very concerned indeed.

I'm not sure the government can rely on "growth" and the private sector bursting into life and making it all better. The government NEEDS this to happen. Without it they either have to cut or take.

but.....they will be out in a few years and in the meantime will have feathered their nests so all of this is irrelevant to them.

[fido]

12gauge said:

Balls is right, you cant cut your way to growth, but Osbourne is also right, you cant borrow your way out of debt.

Then are also both wrong.

"You can cut your way to growth" - cut out unneccesary expenditure selectively in areas such as benefits, NHS, defence and reduce corporate taxation (direct and business rates) to stimulate economic activity. It might not be popular with the electorate [probably less so given that all parties have made an issue of higher income and corporate taxation] but it would make economic sense.

"you cant borrow your way out of debt" - if increased productivity from fiscal stimulation is greater than the cost of borrowing then it might work, but given that governments don't have a great record in picking winners, especially when electoral bribery is far more tempting for some parties [cough: free laptops], unless you can target specific industries which have long-term economic benefits e.g. infrastructure, skills training and not just create a bubble ala property.

[Ozzie Osmond]

Oh yes, the governmemt does have a solution to its debt problem,

I-N-F-L-A-T-I-O-N

[ElvisPenhaligon]

Ozzie Osmond said:

Oh yes, the governmemt does have a solution to its debt problem,

I-N-F-L-A-T-I-O-N

But surely this then destroys confidence in the currency as a store of value?

It will be interesting to see what happens to wage increases when a recovery comes. I am guessing (cynically) that inflation CPI, RPI will be very very high and wage inflation will be less, but the gap small.

Most of the public are ignorant of fiscal drag.

I suppose if they can string it out for long enough, no-one will notice.

[Fittster]

anonymous said:

[redacted]

What is far more likely, or so investors fear, is that Britain will inflate the deficit away by debauching the currency: as inflation rises alongside the money supply, every pound we owe will be worth that little bit less. This is what we did in the 1970s – and most other times we have faced a debt crisis. So suspicions that a repeat performance is on the cards are not difficult to understand: the pound has already fallen by around a quarter since the start of the crisis; the Bank of England has embarked on a quantitative easing scheme that involves printing enough money to buy the annual economic output of Denmark; and inflation is threatening to leap well above the Bank's 2 per cent target.

Might history repeat itself? You can understand why the market thinks so: we are facing not only the debts from the current crisis (equivalent to those incurred in the Second World War) but a looming bill of almost double the size from the ballooning health and pension costs of an ageing population. Plus, one of the peculiarities of the British debt market – that the Treasury issues bonds that take far longer to mature than most other countries' – has historically made it easy for profligate governments to create the odd burst of inflation without being punished as badly as the Italians or French, whose bonds are short-term, and so need to be rolled over more often.


Yet however much today's politicians may be tempted to try to inflate away their debts, this avenue is in fact far more difficult than it was in the 1970s. First, it would mean throwing away the
2 per cent inflation target that the Bank of England has kept to for more than a decade. Second, investors are far more mobile than 30 years ago: one of the by-products of globalisation is the speed with which capital can be withdrawn from a country. That means, according to the International Monetary Fund, that inflation in single digits – say 6 per cent – would "not make much of a dent in the real value of the debt", because investors would charge the governments higher interest rates if they got even a sniff of impending inflation. Which implies that only inflation in the high double digits – 1970s style – would do the trick.

Third – and perhaps most importantly – governments have, largely unwittingly, sewn safeguards into the debt market which make an inflation strategy pointless. Since the 1970s, we have issued an increasing amount of debt in the form of index-linked bonds, which now account for a quarter of the debt market. These are inflation-proof: the debts increase automatically alongside inflation. Then there are the country's other liabilities: public sector pensions (circa £800 billion), the state pension (£1.4 trillion) and the costs of private finance initiatives (£140 billion), all of which are tied to inflation.

In fact, around four fifths of the state's debt bill is inflation-proof. The only way ministers and mandarins could inflate their way out of the crisis would be to rip up all the contracts that tie these debts to inflation: possible in the case of the state pension (which is one reason why Gordon Brown's pledge to link it to earnings is probably doomed), difficult for all the rest.

http://www.telegraph.co.uk/finance/comment/edmundc...

However, there's always the default.

[HedgehogFromHell]

Ozzie Osmond said:

Oh yes, the governmemt does have a solution to its debt problem,

I-N-F-L-A-T-I-O-N

I-N-F-L-A-Y-T-I-O-N






Old fast show joke.. I ever heard Paula Fish' voice in my head as i read your post!

I do agree with it though, i think we'll end up with rampant inflation.