Borrowing money to finance capital projects is "good debt"
This is because the return on the investment project is greater that the cost of borrowing money
As is spending on training of say - nurses - where it would be a stupid government that cuts such spending leaving a shortage that results in highly expensive agency nurses being used instead
The more debt you can pay off, the less you pay in interest.
Yes - but when you pay the debt off the bankers stop earning interest. That's what the IMF and bankers really hate about being debt free - you can spend your money on useful things like health care or police rather than handing tens of billions of hard earned taxpayers money over to them year on year forever.
Why do you think they are so keen for house prices for example to rise and rise - more debt for longer and more interest for them.
Still we bailed them out - so they can now s&&&&w us over!
Even if the IMF are correct and we could afford to live with high levels of debt for all eternity why would we want to? Blowing countless billions a year on needless interest is more than a tad wasteful in my opinion.
Are we sure there hasn't been a typo and it was the IMF saying this? It sound more like MFI
The IMF have been consistently getting almost all their predictions/opinions regarding the UK economy wrong for donkeys years now. I don't even pay attention to them any more tbh.
The flaw in that thinking is of course that there will be further shocks to the country's economy as the economic/credit cycle ends. If we never reduce the level of debt then it will keep on increasing with each crisis until it becomes unbearable and the country is bankrupt.
For the entire period between 1910 and 1979 the UK's debt to GDP ratio was never less than 100%. It was over 200% for all the period between 1945 and 1960 which coincided with biggest advance in living standards the UK has ever seen. I incredibly public spending increased throughout the 50s from 35% when Attlee left office to over 40% by the time Macmillan won the 1959 election.
Britain is not Greece, the right wings obsession with comparing the UK to Greece is ludicrous. We are regarded as one of the worlds financial safe bets hence why the markets continue to lend us money at historic low rates and hence the IMFs assertion.
For the entire period between 1910 and 1979 the UK's debt to GDP ratio was never less than 100%. It was over 200% for all the period between 1945 and 1960 which coincided with biggest advance in living standards the UK has ever seen. I incredibly public spending increased throughout the 50s from 35% when Attlee left office to over 40% by the time Macmillan won the 1959 election.
Britain is not Greece, the right wings obsession with comparing the UK to Greece is ludicrous. We are regarded as one of the worlds financial safe bets hence why the markets continue to lend us money at historic low rates and hence the IMFs assertion.
There is no difference between USA, UK, Greece, Germany or Argentina.
If you run persistent trade and budget deficits, you will go bankrupt.
There is no difference between USA, UK, Greece, Germany or Argentina.
If you run persistent trade and budget deficits, you will go bankrupt.
1. Trade deficits are now seen as largely irrelevant by most economists: countries don't trade, people do. It's a global market.
2. Even a perpetual budget deficit doesn't necessarily mean a country will go bankrupt (not that a sovereign nation can be forced into involuntary default on debts denominated in its own currency anyhow). It depends on the level of the deficit and its impact on the overall debt-to-GDP ratio.
There is no difference between USA, UK, Greece, Germany or Argentina.
If you run persistent trade and budget deficits, you will go bankrupt.
You will only go bankrupt if the creditors call the loans in and you have no way of paying them off. There is no sign that any creditor wants to call our loans in.
In the world of football both Real Madrid and Barcelona have huge debts - relative to their size. As the main owners of the debts also support these clubs then they will not call in these debts so they survive.
In our case we have the Bank Of England that can theoretically match all our debt. They could also be the institution that "lends" us the money with a 0% rate and no interest in calling in the debt. We continue giving the banks free interest for some reason.
1. Trade deficits are now seen as largely irrelevant by most economists: countries don't trade, people do. It's a global market.
2. Even a perpetual budget deficit doesn't necessarily mean a country will go bankrupt (not that a sovereign nation can be forced into involuntary default on debts denominated in its own currency anyhow). It depends on the level of the deficit and its impact on the overall debt-to-GDP ratio.
1 - This shows a complete lack of understanding of trade deficits. The trade balance must always = 0. ...... Always. Any difference is made up by selling chunks of assets off in return for foreign currency, that'll be Post Offices, Gas utilities, London real Estate etc. When you run out of Assets to sell you get catastrophic economic collapse, right now we have chomped our way through over 50% of UK assets, that's 50% of the UK is in foreign hands. Right now the clock is ticking !
2- The debt to GDP ratio is irrelevant. All that is relevant is the ability to pay the interest on the debt. What happens if that 2% interest rate goes to 5%? That £50bn interest payment goes to £120bn, which huge public service will we need to cut to service that payment ? The NHS? Pensions?
"Austerity Forever" will destroy the UK economy, and destroy the concept of the middle class.
People who are not ideologically driven dimwits have come to realise this as well.
I expect the general public will also do an about-face over the next few years.
1 - This shows a complete lack of understanding of trade deficits. The trade balance must always = 0. ...... Always. Any difference is made up by selling chunks of assets off in return for foreign currency, that'll be Post Offices, Gas utilities, London real Estate etc. When you run out of Assets to sell you get catastrophic economic collapse, right now we have chomped our way through over 50% of UK assets, that's 50% of the UK is in foreign hands. Right now the clock is ticking !
2- The debt to GDP ratio is irrelevant. All that is relevant is the ability to pay the interest on the debt. What happens if that 2% interest rate goes to 5%? That £50bn interest payment goes to £120bn, which huge public service will we need to cut to service that payment ? The NHS? Pensions?
Why would the rate jump from 2% to 5%.
And if it did why not borrow from the BOE?
One reason the rates are so low is that lenders know that we can cover the debts. They would rather keep earning the interest they are than forcing us to look elsewhere.
Comments
But the OP posted a link to the Torygraph. I thought you would have approved.
Yes - but when you pay the debt off the bankers stop earning interest. That's what the IMF and bankers really hate about being debt free - you can spend your money on useful things like health care or police rather than handing tens of billions of hard earned taxpayers money over to them year on year forever.
Why do you think they are so keen for house prices for example to rise and rise - more debt for longer and more interest for them.
Still we bailed them out - so they can now s&&&&w us over!
Are we sure there hasn't been a typo and it was the IMF saying this? It sound more like MFI
Puts tory rhetoric about their opponents being in the pocket of the unions into context doesn't it....
The £5k cost is the PFI equivalent
For the entire period between 1910 and 1979 the UK's debt to GDP ratio was never less than 100%. It was over 200% for all the period between 1945 and 1960 which coincided with biggest advance in living standards the UK has ever seen. I incredibly public spending increased throughout the 50s from 35% when Attlee left office to over 40% by the time Macmillan won the 1959 election.
Britain is not Greece, the right wings obsession with comparing the UK to Greece is ludicrous. We are regarded as one of the worlds financial safe bets hence why the markets continue to lend us money at historic low rates and hence the IMFs assertion.
There is no difference between USA, UK, Greece, Germany or Argentina.
If you run persistent trade and budget deficits, you will go bankrupt.
1. Trade deficits are now seen as largely irrelevant by most economists: countries don't trade, people do. It's a global market.
2. Even a perpetual budget deficit doesn't necessarily mean a country will go bankrupt (not that a sovereign nation can be forced into involuntary default on debts denominated in its own currency anyhow). It depends on the level of the deficit and its impact on the overall debt-to-GDP ratio.
You will only go bankrupt if the creditors call the loans in and you have no way of paying them off. There is no sign that any creditor wants to call our loans in.
In the world of football both Real Madrid and Barcelona have huge debts - relative to their size. As the main owners of the debts also support these clubs then they will not call in these debts so they survive.
In our case we have the Bank Of England that can theoretically match all our debt. They could also be the institution that "lends" us the money with a 0% rate and no interest in calling in the debt. We continue giving the banks free interest for some reason.
1 - This shows a complete lack of understanding of trade deficits. The trade balance must always = 0. ...... Always. Any difference is made up by selling chunks of assets off in return for foreign currency, that'll be Post Offices, Gas utilities, London real Estate etc. When you run out of Assets to sell you get catastrophic economic collapse, right now we have chomped our way through over 50% of UK assets, that's 50% of the UK is in foreign hands. Right now the clock is ticking !
2- The debt to GDP ratio is irrelevant. All that is relevant is the ability to pay the interest on the debt. What happens if that 2% interest rate goes to 5%? That £50bn interest payment goes to £120bn, which huge public service will we need to cut to service that payment ? The NHS? Pensions?
People who are not ideologically driven dimwits have come to realise this as well.
I expect the general public will also do an about-face over the next few years.
Why would the rate jump from 2% to 5%.
And if it did why not borrow from the BOE?
One reason the rates are so low is that lenders know that we can cover the debts. They would rather keep earning the interest they are than forcing us to look elsewhere.