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    (Original post by Quady)
    I didn't realise public borrowing was separate to interest.

    So we are currently borrowing 13% of GDP, then there is interest as well - where does that money come from?

    Well yes, that's kind of the problem. If the country can't afford to finance the debt then we have to borrow more just to cover the interest payments, which has the obvious knock-on effect of higher interest payments the next time around. And so debt keeps growing and GDP growth simply keeping up isn't enough...
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    (Original post by Potally_Tissed)
    Well yes, that's kind of the problem. If the country can't afford to finance the debt then we have to borrow more just to cover the interest payments, which has the obvious knock-on effect of higher interest payments the next time around. And so debt keeps growing and GDP growth simply keeping up isn't enough...
    Thats a separate issue, I was just talking about funding it.

    Public sector spending could be 99% non interest, 1% interest or 99% interest, 1% non interest.

    If taxation covers 97%, a futher 3% needs to be borrowed. The new borrowing isn't depenent on what its funding.

    If in the next year the cost of interest payments go up by 3% of GDP and GDP increases 3.4% the interest can be funded by further borrowing without making the public finances worse.

    I know exactly what your saying/why and I don't disagree. All I was saying is that there will be the capacity to borrow as long as borrowing doesn't increase above GDP growth - or at least you can be a lot more confident you can borrow further if borrowing is kept under that level.
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    (Original post by Potally_Tissed)
    And so debt keeps growing and GDP growth simply keeping up isn't enough...
    Since both GDP and borrowing are exponential why can't it keep up?
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    because, as you will undoubtedly realise, growth cannot continue exponentially. there are finite resources on the planet, and productivity increases taper off over time (people can only work so hard, so many hours, machines performance can only economically be enhanced so far).

    so over time, gdp growth will trend towards zero - its also the law of large numbers. if i have a company making £1, its easy to double my money. 100% growth. If I have a co making £1bn, its very hard to make the same growth. As the overall size of GDP goes up, growth as a % trends to zero.

    Debt servicing, on the other hand, is not subject to these constraints - it is governed by the supply of credit. We have benefitted from a period of unrealistically low interest rates which has encouraged prudent gordon to put it, effectively, all on the credit card.

    as you will have noticed, the chinese have been largely supplying all this money to the west cheaply. they are now looking at monetary tightening. interest rates go up.

    interest rates long term will prob be around 5%. GDP will trend down from 3% to 2% over time. hence the need to make sure that your debt is at a manageable level. this is why the EU and the IMF set out maximum borrowing guidance - PSBR as a % of GDP. We as a nation are obviously way outside of the deemed appropriate %, which is why it is likely, within the next six months rating agencies like Moodys will downgrade UK debt from its AAA rating.

    This, in turn, will make it more expensive for the government to borrow new money and service existing interest. the spiral risks commencing thus.
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    (Original post by Quady)
    Thats true, but obviously you just divide through to normalise to 100%. You could still borrow.

    Personally I'd be suprised if we go over 100% debt:GDP though.
    I wouldn't be surprised I would be shocked :eek3:
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    prepare to be shocked.

    Some people estimate, when you add in public sector pension obligations and also PFI (amazing to me that the gov't manages to get away with classifying this as not national debt, particularly after the Railtrack situation) - that the UK's debt is actually already over 100% of GDP. Here's a link.

    http://www.economicshelp.org/blog/uk...national-debt/

    Bear in mind that was written a year ago, and Mr. Darling has in the meantime been printing cash like paper is going out of fashion since. So my feeling is, when you add in all the UK gov't liabilities, we are already well over 100% of GDP.
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    (Original post by TShadow383)
    You're abusing two sets of figures here - this recession is far deeper than the 80/81 or 91/92 recessions:
    You're right, this recession was definitely a steeper U-shape than the last two, my point is that we've recovered quite quickly from a "omg its doomsday" type scenario in the markets. Whether this was down to swift government action or whether it was simply because the markets over-reacted is unclear, its probably got to be a bit of both.

    My point is that the government did really well in controlling unemployment. Unemployment hasn't gone as high, but crucially it hasn't been persistent. It doesn't look like high levels of unemployment will remain for years after this recession like they did under the Tories. We aren't going to have a repeat of the famous "lost generation", I think the government has to be congratulated.

    Except that to cut the structural deficeit to zero (which is going to have to happen one way or another) we'll have to scrap around a fifth of government jobs, which would put us above that figure. Also I think the disabled used to be counted into jobless totals?
    And once again, don't think unemployment's peaked just yet - considering that it takes a state defeceit of £500,000,000 PER DAY, the scrappage scheme, 15% VAT rate and the bank of england's "let's print money mostly to drive down gilt prices" policy to produce a growth of 0.1%, I'd say the worst is yet to come.
    Perhaps, although there are unlikely to be such sweeping structural changes until the economy is at least steadily growing. Cutting public sector jobs right now would be political suicide. Despite all the brutal rhetoric, as far as I can see Labour and the Tories have exactly the same approach to the deficit: so very little and wait for growth to slash it.

    I believe that we stopped counting disabled people on unemployment figures during the 1980s. The Labour/Lib Dem position is that the Tories did it to hide the true scale of increases in unemployment during the 80s.
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    (Original post by jacketpotato)
    You're right, this recession was definitely a steeper U-shape than the last two, my point is that we've recovered quite quickly from a "omg its doomsday" type scenario in the markets. Whether this was down to swift government action or whether it was simply because the markets over-reacted is unclear, its probably got to be a bit of both.
    The reason the financial markets have recovered is simple. Gov'ts have printed money globally - QE. Interest rates are too low for savings, and banks aren't lending the money on. So they have the cash, and needed assets to buy. They bought shares and gold. so you got asset price inflation in those classes. Another bubble. The banks just reflated their balance sheets by betting on the obvious - that with so much cash sloshing around kept within the financial markets, share prices would rise.


    (Original post by jacketpotato)
    My point is that the government did really well in controlling unemployment. Unemployment hasn't gone as high, but crucially it hasn't been persistent. It doesn't look like high levels of unemployment will remain for years after this recession like they did under the Tories. We aren't going to have a repeat of the famous "lost generation", I think the government has to be congratulated.
    Well, remember that Gordon and Tony before figured out the wheeze that if you have 50% of young people going to university (doing great work like media studies) then you keep about a million extra people off the dole register. Plus have you looked at the conditions for claiming these days and how little cash you get? I know in my industry - architecture - most people are either ineligible, as they have a modicum of savings income from when they were employed, or they don't bother, as for £50-odd a week, they can just do some part time work for mates and save themselves the hassle of dealing with civil servants.

    So I'd guard about getting too excited about the U claimant figures. They are likely to start increasing again in q12010, anyway.
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    (Original post by jrhartley)
    The reason the financial markets have recovered is simple. Gov'ts have printed money globally - QE. Interest rates are too low for savings, and banks aren't lending the money on. So they have the cash, and needed assets to buy. They bought shares and gold. so you got asset price inflation in those classes. Another bubble. The banks just reflated their balance sheets by betting on the obvious - that with so much cash sloshing around kept within the financial markets, share prices would rise.
    Banks had what they thought were perfectly sound balance sheets, and then suddenly found that many of their assets were worthless - billions were wiped off balance sheets in a matter of weeks. QE wasn't so giving the banks extra cash so much as trying to return balance sheets to their pre-2008 state.

    It just isn't true that the banks had money sloshing around - credit has been very very scarce.

    I don't think there has been much asset price inflation in shares - see the 3-year chart at http://www.guardian.co.uk/business/ftse. There has been a recovery, but we are still below mid-2008 levels.

    Well, remember that Gordon and Tony before figured out the wheeze that if you have 50% of young people going to university (doing great work like media studies) then you keep about a million extra people off the dole register.
    Perhaps. But university is an important instrument of social mobility: a degree, it often doesn't matter what it is, is a requirement to get most decent jobs these days. You've also got to remember that industry asked for more graduates: see http://www.guardian.co.uk/education/...duatesnotfewer.

    Plus have you looked at the conditions for claiming these days and how little cash you get? I know in my industry - architecture - most people are either ineligible, as they have a modicum of savings income from when they were employed, or they don't bother, as for £50-odd a week, they can just do some part time work for mates and save themselves the hassle of dealing with civil servants.

    So I'd guard about getting too excited about the U claimant figures. They are likely to start increasing again in q12010, anyway.
    Absolutely right. JSA is a pittance, the Daily Mail benefit-hating crowd forget that it's halved in real-terms since the 80s. But I'd much rather have people doing less hours or shifting to part-time work than being lumped on the dole.
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    (Original post by Quady)
    I didn't realise public borrowing was separate to interest.

    So we are currently borrowing 13% of GDP, then there is interest as well - where does that money come from?
    More borrowing! Great plan eh?
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    I'm sorry, but I totally disagree with your view regarding there hasn't been asset price inflation - and certainly since Northern Rock there has been a massive flip, based on the expectation of recovery and phoney cash. Everyone I speak to in the City said it was a no-brainer - loads of fresh cash, hot off the press, they weren't going to lend it out given the economic climate and risk of further default, and they weren't going to save it at 2-3%, so it had to be shares and gold. now, maybe the people i've been speaking to at gs, various hedge funds, deutsche, etc, are just taking me for a mug and telling me this for a joke (bit weird, given that i used to work with them), or maybe they are telling me this because this is what they genuinely believe and have acted accordingly.

    FTSE is still prob 10% over-valued min in my book. I'd guard against using 2008 as your benchmark for fair value.

    Regarding university - its ridiculous making people feel obliged to do phoney degrees like media studies when the country needs good quality craftsmen. All parties are obsessed with white collar work and have made people feel averse to going into blue-collar careers. all the old technical colleges and polys - where you could learn a trade - have largely gone. ironic that plumbers now can clear £70k a year + and people are coming out with degrees which are worthless and going for jobs in Dominoes at £12K a year. Hopefully someone will wake up to the fact that academia is not for everyone, and furthermore, not good for the balance of skills for this nation.
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    We have to remember that all those people who don't want a Tory government are against the lesser regualted banks who got us in to this mess. So instead Mr Brown decided that Keynesian economic theories are the way to heal the economy. We may have appeared from the recession but with over £90bn of debts to repay, we are still 4 and a half miles inside the woods stood in a burning shack. The only way to help our cause is not to spend out of recession but to cut out of recession. Gordo doesn't know what he's doing. Get him out of Number 10.
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    (Original post by RooKnight)
    We have to remember that all those people who don't want a Tory government are against the lesser regualted banks who got us in to this mess. So instead Mr Brown decided that Keynesian economic theories are the way to heal the economy. We may have appeared from the recession but with over £90bn of debts to repay, we are still 4 and a half miles inside the woods stood in a burning shack. The only way to help our cause is not to spend out of recession but to cut out of recession. Gordo doesn't know what he's doing. Get him out of Number 10.
    If you are against stimulating the economy,which was a proven success in the Depression era, with Nazi Germany and the USA successfully using a Keynesian econimic policy,how do you suppose the Tories would get us out of the recession,while cutting down our public debt yet at the same time promoting economic growth with nationwide employment opportunities?
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    (Original post by RooKnight)
    We have to remember that all those people who don't want a Tory government are against the lesser regualted banks who got us in to this mess. So instead Mr Brown decided that Keynesian economic theories are the way to heal the economy. We may have appeared from the recession but with over £90bn of debts to repay, we are still 4 and a half miles inside the woods stood in a burning shack. The only way to help our cause is not to spend out of recession but to cut out of recession. Gordo doesn't know what he's doing. Get him out of Number 10.
    Given that the deficit for this year alone is £178bn I doubt the accuracy of your £90bn figure.
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    (Original post by Teaddict)
    Given that the deficit for this year alone is £178bn I doubt the accuracy of your £90bn figure.
    That's the figure for 08/09.

    Its a weird figure to be using though, the 175 for the next two years has a lot more impact.

    Even John Major had budget deficits over 100bn
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    (Original post by Krakatoa)
    If you are against stimulating the economy,which was a proven success in the Depression era, with Nazi Germany and the USA successfully using a Keynesian econimic policy,how do you suppose the Tories would get us out of the recession,while cutting down our public debt yet at the same time promoting economic growth with nationwide employment opportunities?
    Even the keynesians are supposed to save in the good times. What did ol' Gordon do? He spent like he's never spent before.

    And there are some academics who theorise that the keynesian policies during the great depression exacerbated the situation still further. We may never know...
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    (Original post by Teaddict)
    Given that the deficit for this year alone is £178bn I doubt the accuracy of your £90bn figure.
    Well I apologise for making the debt look smaller than it actually is, my bad.

    Edit: If I were to get out of that one on technicalities, I did say over £90bn.

    (Original post by Krakatoa)
    If you are against stimulating the economy,which was a proven success in the Depression era, with Nazi Germany and the USA successfully using a Keynesian econimic policy,how do you suppose the Tories would get us out of the recession,while cutting down our public debt yet at the same time promoting economic growth with nationwide employment opportunities?
    There's a difference between stimulating the economy and spending us into 40 years of debt. Firstly, technically we are out of recession. Secondly, the idea is to develop more workforce for primary level labour in the stable family plan with marriage tax breaks (which I will admit needs tweaking). They have admitted that higher taxes will have to be implemented and cuts will have to be made, the aim is to keep the NHS safe from these cuts but aim for other areas. As I am not in the shadow cabinet, I cannot explain when and where these cuts will come from.

    David Cameron is aiming for the same policy as Tony Blair did with the equality of oppurtunity programmes.
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    (Original post by Krakatoa)
    If you are against stimulating the economy,which was a proven success in the Depression era, with Nazi Germany and the USA successfully using a Keynesian econimic policy,how do you suppose the Tories would get us out of the recession,while cutting down our public debt yet at the same time promoting economic growth with nationwide employment opportunities?
    You are making it sound like Keynesian policy is the be-all and end-all of economics. As has been noted above many academics will tell you that the policies of the US government made the great depression a lot worse than it otherwise would have been, and Nazi Germany wasn't a massive economic success, just living on borrowed time. Like the Soviet Union, state controlled economies look like they are making massive progress initially, but in the long run stifle progress and ultimately fail.

    And anyway, if this government's policy was too spend massively during recessions (even though Gordon thought he had abolished boom and bust) they should have not been spending massively during the boom as well.
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    (Original post by Wednesday Bass)
    Since Labour came into power 13 years ago, I can't see how my area has improved at all.

    I live 30 miles north of Newcastle that at the moment is getting 5 new schools built I think. Whereas in my town, the one high school we have is a split site and each of the sites is crumbing, but because of our good exam results we don't qualify for a new school to be built. The schools minister visited a couple months ago and told the headteacher and our head boy that the only chance of a new school is for the split site. But he told the press that getting a new school was a top priority. So we don't get a new school but 30 minutes down the road there are academies being built in place of failing schools. I live in the "forgotten county" - we would be better off if Scotland claimed North Northumberland as we sure as hell don't get any use from being part of England here.
    Education in Northumberland is incredibly complex because of the geographical diversity of the county and the three-tier system. Nevertheless, there will always be political disparity between rural Northumberland and the towns of the south east like Ashington, Blyth and Cramlington. I am not sure which school you go to, but I assume it is the Duchess in Alnwick? I went to first and middle school in Alnwick, then middle school (year eight) in Rothbury and high school in Morpeth and, honestly, there is nothing wrong with education in north Northumberland; it is far better than the rest of the country.

    However, improvement is not always about facilities. Things that Labour have introduced that have benefited me include: the national minimum wage; home computer initiative; child and working tax credits; education maintenance allowance; and widening participation in higher education.
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    (Original post by evantej)
    Education in Northumberland is incredibly complex because of the geographical diversity of the county and the three-tier system. Nevertheless, there will always be political disparity between rural Northumberland and the towns of the south east like Ashington, Blyth and Cramlington. I am not sure which school you go to, but I assume it is the Duchess in Alnwick? I went to first and middle school in Alnwick, then middle school (year eight) in Rothbury and high school in Morpeth and, honestly, there is nothing wrong with education in north Northumberland; it is far better than the rest of the country.

    However, improvement is not always about facilities. Things that Labour have introduced that have benefited me include: the national minimum wage; home computer initiative; child and working tax credits; education maintenance allowance; and widening participation in higher education.
    You are correct.
    If you come have a look around the Baliffgate site, you'll see damp in a lot of the rooms, our study room has damp - just painted over, for example. KEVI is looked after a lot better than the Duchess. For example - the KEVI music department has it's own radio station. The only way we could do that is if we stood on the roof with the antennae to transmit. The point I was trying to make was the lack of funding.
    Both our sites are off the charts (literally) with the ecomonic gradings. At main school, the charts would need 2 more bars to have the schools rating on. The reason we can't repair anything, more than a paint of coat or a couple of new desks, is because of the lack of funding up this area.
    And for a Government that's spent 13 years preaching "Education, Education, Education", I think it's disgusting.
 
 
 
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