Economics - in laymans terms please

[Mobsta]

I was hoping that in laymans terms, someone with a greater understanding of the implications of national debt (globally) might be willing to summarise why national debt is the problem it is, why this debt continues to increase and how politicians are able to make light of the situations until they reach critical mass, and also what might happen should loans and rescue funds just not materialise.

I'm not very knowledgeable on these matters, but would it not take a depression and a few apologies before the people of the world realised what trouble their governments had put them in?

Also, statistically speaking, isn't the recession just a blip on the radar in that statistically speaking, we are actually due a depression?

[HOGEPH]

I been laid off from work
My rent is due
My kids all need
Brand new shoes

So I went to the bank
To see what they could do
They said son - looks like bad luck
Got-a hold on you

Chorus:
Money's too tight to mention
I can't get an un-em-ploy-ment ex-ten-sion
Money's too tight to mention

I went to my brother
To see what he could do -
He said bro-ther like to help you
But I'm unable to
So I called on my fa-ther fa-ther
Oh my fa-ther
He said

Chorus:
Money's too tight to mention
Oh mo-ney mo-ney mo-ney mon-ey
Mo-ney's too tight to mention
I can't even qual-i-fy for my pension

We talk a-bout rea-gan-om-ics
Oh lord down in the con-gress
They're passing all kinds - of bills
From down on cap-it-ol hill - (we've tried them)

Chorus:
Money's too tight to mention
(spoken) cut-back!
Mo-ney mo-ney mo-ney mon-ey
We're talk-in' a-bout mon-ey mon-ey
We're talk-in' a-bout mon-ey mon-ey
We're talk-in' 'bout the dollar bill
And that old man that's over the hill
Now what are we all to do
When the mon-ey's got a hold on you?
Mo-ney's too tight to mention
Oh mon-ey mon-ey mon-ey mon-ey
Mo-ney's too tight to mention
Di-nero - mon-ey oh yeah
We're talk-in' a-bout mon-ey mon-ey
We're talk-in' a-bout mon-ey mon-ey
We're talk-in' a-bout mon-ey mon-ey
We're talk-in' a-bout mon-ey mon-ey…..

[king arthur]

HOGEPH said:

We're talk-in' a-bout mon-ey mon-ey…..

Oh God. So now, on top of everything that Mobsta just said, you've made us all think of Mick Hucknall too.

[weezb]

Mobsta said:

I was hoping that in laymans terms, someone with a greater understanding of the implications of national debt (globally) might be willing to summarise why national debt is the problem it is, why this debt continues to increase and how politicians are able to make light of the situations until they reach critical mass, and also what might happen should loans and rescue funds just not materialise.

I'm not very knowledgeable on these matters, but would it not take a depression and a few apologies before the people of the world realised what trouble their governments had put them in?

Also, statistically speaking, isn't the recession just a blip on the radar in that statistically speaking, we are actually due a depression?

I'll attempt this, but I'm well prepared for someone with considerably more knowledge to come in and say I'm talking ste.

My understanding is the Government racks up debt which needs to be paid back by a combination of job cutting in the public sector and good old tax, now job cutting in the public sector seems to remove funds from the economy which is a bad thing, and tax at the level required to pay back the enormous sums is also a knee in the groin to business, as they need to lay off workers to cope/reduce the demands.

As you say, this "correction" (semantically call it recession or depression) is as predictable as it is overdue and necessary.

In sort, we have (meaning the economy) have living beyond our means for too long, the vultures have came home to roost.

Overall though, it's all little more than an elevated 3-card trick shyster. Where is the debt? Under America? Oh no, it's all owed (indirectly or not) to China!

[jeevescat]

If you spend more each month than you earn, at some point you're gonna be in the poo.

The US government currently spends $200 billion more per month than it receives in income.

Simples.

[Mobsta]

jeevescat said:

If you spend more each month than you earn, at some point you're gonna be in the poo.

The US government currently spends $200 billion more per month than it receives in income.

Simples.

Thanks for ALL the replies above but taking your simple comment jeevescat, when does the camels back break, who is the last to see it coming, what happens when the camels back does break and why should I believe that the camels back will definitely not break - when I think it will. I just can't imagine that far, as I don't think any of us day to day expect that it will.

Seriously, a few thousand people die in world trade centre attacks (albeit in 'important buildings') and a decade on we are still feeling tremors. Am I being silly thinking a global economic clapse of ten or 100-fold the magnitude is inevitable, eventually at some point, the way ThIngs are going? Or do the monopy bankers just keep engouraging us to pass go in the car iron and shoe, until they run out of trees to keep printing the monopoly money?

[Kinky]

This sums it up nicely for me

http://www.youtube.com/watch?v=NOzR3UAyXao&fea...

[ClintonB]

Kinky said:

This sums it up nicely for me

http://www.youtube.com/watch?v=NOzR3UAyXao&fea...

But it is fronted by a chap in a truly offensive ging syrup = fail


OP - Forget thinking about it on a national level. It really isn't that far removed from an individual situation.

[AJS-]

The camel's back breaking would probably be a major country defaulting on it's debt. US looks like the front runner at the moment and that could happen soon.

It could also fail if they don't realise the prices they want for newly issued bonds, as this could mean they literally don't have enough to pay their bills.

I would actually like to see this happen in order to really focus politicians on the things that can be cut.

IMO though, the real damage is done not by a sudden shock but by the 4 years of stagnation Europe and the US have had already, and this as been made worse by the sluggish refusal to make meaningful cuts.

[Esseesse]

Mobsta said:

what happens when the camels back does break

war

[Esseesse]

king arthur said:

Oh God. So now, on top of everything that Mobsta just said, you've made us all think of Mick Hucknall too.

I've never understood how popular it seems to be to dislike Mick Hucknall. His songs are actually about something and I'd be willing to bet he can sing far better than any on the xfactor type shows that are so popular. Simply Red were very popular too at one point, how can they go from that to being universally slated?

/OT

[ClintonB]

AJS- said:

The camel's back breaking would probably be a major country defaulting on it's debt. US looks like the front runner at the moment and that could happen soon.
.

That = WW3. In reality, it simply won't happen as far too many have far too much to lose. If your mate was 6-5 and 300+ pounds, would you really try and bug him in a properly aggressive manner for that bag he owes you, or would you just accept a few quid a week?

[AJS-]

ClintonB said:

AJS- said:

The camel's back breaking would probably be a major country defaulting on it's debt. US looks like the front runner at the moment and that could happen soon.
.

That = WW3. In reality, it simply won't happen as far too many have far too much to lose. If your mate was 6-5 and 300+ pounds, would you really try and bug him in a properly aggressive manner for that bag he owes you, or would you just accept a few quid a week?

You're right I'm sure, that too many people have too much to lose, but it must happen in some form. They simply can not keep spending and taxes at current levels indefinitely. Probably not an actual "sorry we're broke" default, but I suspect they will struggle to raise capital from bond sales.

I guess there will be some sort of IMF bailout tied to quite dramatic spending cuts.

[pacman06]

Another question to the people in the know if I may (again) please?

That cloud that planes couldnt see yet the news showed us it's position on a map, why hell did that cause economicy type problems? surley its just a few missed flights and refunds missed meetings??

9/11, trying my best to not be insensitive but (apart from the lives lost) how does two tall buildings a hole in a building shaped like a pentagon and a whole in the ground (again lots of lives lost loved ones left behind etc) affect stock markets? in the simpliest terms surley it's cost of towers (ok thats billions) four planes and a couple of months of building work and some earth to fill that hole in the ground.. How does that send out ripples all over the world?

Lastly could America ever see Hyper inflation? If so how long? What are the chances of someone using this situation to knock America off it's perch not by force by say recalling bonds or something similar.

(sorry if all the above is nonsense but say a shops windows are broken that does not cause the shop either side to st their pants and close does it?)

[AJS-]

pacman06 said:

Another question to the people in the know if I may (again) please?

That cloud that planes couldnt see yet the news showed us it's position on a map, why hell did that cause economicy type problems? surley its just a few missed flights and refunds missed meetings??

On the scale of the whole of western Europe, those meeting, refunds and so forth mount up quite quickly into the billions. On the other hand on the scale of the whole of western Europe that's still not an awful lot. A big figure of tens of billions of pounds sells newspapers though.

There's also the uncertainty, so if you are holding shares in for example a French company building a bridge in Spain, then getting a hold up of a month or more might cost them fortunes. Hence people sell shares.

pacman06 said:

9/11, trying my best to not be insensitive but (apart from the lives lost) how does two tall buildings a hole in a building shaped like a pentagon and a whole in the ground (again lots of lives lost loved ones left behind etc) affect stock markets? in the simpliest terms surley it's cost of towers (ok thats billions) four planes and a couple of months of building work and some earth to fill that hole in the ground.. How does that send out ripples all over the world?

Uncertainty again, but on a massive scale. Will there be a war? Will there be further attacks?

pacman06 said:

Lastly could America ever see Hyper inflation? If so how long? What are the chances of someone using this situation to knock America off it's perch not by force by say recalling bonds or something similar.

(sorry if all the above is nonsense but say a shops windows are broken that does not cause the shop either side to st their pants and close does it?)

America could see hyper-inflation. It might do if they resort to printing money as a way of easing their debt burden.

As for knocking America off it's perch, I would see this as America knocking itself off it's perch rather than the work of a cynical manipulator.

[pacman06]

AJS- said:

As for knocking America off it's perch, I would see this as America knocking itself off it's perch rather than the work of a cynical manipulator.

Thankyou for the reply.

One more pretty please (cheeky I know sorry!)

Does/could any this effect the petro $ could the yen be the PetroCurrency? I know Libya wanted to trade in Euros at one stage..

(sorry that is more than one question!)

Thankyou for the replies it's really appreciated.

[maniac0796]

The thing that always confuses me is that money is only worth something because someone says it is.

I can understand how a hurricane can destroy a peoples lives, because it's a physical thing that we have no control over.

But money is made up by humans, why can't we just rewrite the rule book? Surely America could just stick it's middle finger up and say we're playing a different game now, where interest and debt don't really exist.

[pacman06]

maniac0796 said:

The thing that always confuses me is that money is only worth something because someone says it is.

I can understand how a hurricane can destroy a peoples lives, because it's a physical thing that we have no control over.

But money is made up by humans, why can't we just rewrite the rule book? Surely America could just stick it's middle finger up and say we're playing a different game now, where interest and debt don't really exist.

That and the fact all this "money" is just a shed load of numbers on a screen and no reserves/gold to back it up. It seems like one giant game of monopoly and the rule book has been lost and people have their own take on who gets the bundle of notes sat in the middle of the board (plus the banker is a greedy bd!)

[98elise]

maniac0796 said:

The thing that always confuses me is that money is only worth something because someone says it is.

I can understand how a hurricane can destroy a peoples lives, because it's a physical thing that we have no control over.

But money is made up by humans, why can't we just rewrite the rule book? Surely America could just stick it's middle finger up and say we're playing a different game now, where interest and debt don't really exist.

Money is only worth something because the governement say so. It essentially replaces bartering with people for goods and services. The actualy notes and coins do not have any real value.

A country can only produce a certain amount of value in what it produces in good and services, the exchange of those goods and services is facilitated by the currency in circulation.

If the government just start printing more money, the amount of value in the economy has not risen, so the currencies spending power drops (relative to the amount of extra currency now in circulation).

If a government like the US just defaults, then its game over for its economy. It can't function without borrowing, and who will lend to a government that won't pay its bills.

[Mobsta]

Does a gold reserve denotes a responsibility and ability to repay? Has any country actually said 'were fooked, but tAke this gold...' or does everything get re written whilst all major economies just hang onto their reserves?