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    (Original post by MagicNMedicine)
    What I have a nasty feeling is going to happen, is we won't get that level of growth, we will be stuck at the 1%-2% if we're lucky (if we're not, we'll go back into recession) and every year Osborne is going to be pushing up his borrowing above target.

    The argument for austerity sounds good when you look at forecasts in the future and say we will have reduced public services but borrowing will be much lower and we're more or less balancing the books. But if in five years time it is a case of we have reduced public services but borrowing is only a bit lower then we don't have anything to show for it.
    That is exactly what I think will happen to really.

    But also, even if all these cuts do bring us out of debt, is it really worth doing it so quickly and ruthlessly? Leaving hundreds of thousands, if not millions, of people unemployed. Leaving the disabled and mentally ill to fend for themselves. Do we really want the live in that society?

    (Original post by hslt)
    Ok. Sounds huge. But if they were to be properly informed of how it would actually affect them they would realise that they are no worse off now than they would be previously.

    It's a huge amount for pretty much anyone. But it shouldn't put people off because it shouldn't have a massive impact on them.

    The figure sounds familiar, and I thought that the government were aware it could be a loss making game.
    It shouldn't. But if you have been brought up in that environment, it can be hard to shake off your pre-conceptions.

    And in that case why are we doing it? If it is going to cost more money, then what is the point? Why were the government going on about how we need to make sure the graduate and not the tax payer pays the most. (as I said, even when you take into consideration the funding cuts, if the average fee is over £7.5k then it will cost the taxpayer more).
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    (Original post by GwrxVurfer)
    Even if it doesn't physically exist, it exists electronically as an IOU. There is no difference in relation to this topic. Remember - Paper money is just an IOU as well

    I'd like you to stop calling posters "morons" and answer my question: Do people create money (either physical or electronic money) from thin air and loan it to Governments?

    Unless you say otherwise, we will assume that you stand by your earlier statement that they do.
    Why don't 'we' just read what I linked you to before? If not I'll change moron to stubborn, or lazy. Or you think you know the exact answer and are waiting for me to say something wrong, or overly simplistic so that you can make a smart-assed comment.

    Either way, I think it's fairly difficult to explain and am unwilling to try when you're clearly don't actually want to help yourself find out. Saying that money comes from thin air is obviously a ridiculous reduction of a complex concept - this is why when I said this I then qualified what I said with further explanations and links.
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    (Original post by Oswy)
    It's a relative concept, but the principle always applies - the richer you are the easier you are going to find money in comparison with someone less well off.
    Not really. The repayments are set against how much you earn. So if you have 10 mill in the bank or 10 pounds it does not make a difference.
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    (Original post by storna)
    This is why:



    And, people are selfish. If cuts affect their job, the price of their education, and so forth - they campaign against cuts, regardless of how it will benefit the country as a whole and help reduce the deficit. People can't see beyond their own lives and many have an entitlement complex - they think that the state has an endless pot of money.
    Best post i've seen in a while. Absolutely spot on.

    People don't realise how lucky they are, in comparison to other nations. Living standards are generally quite high here, apart from the odd cases, that are dramatised on the media. These cases are much less common than the media suggests.

    What annoys me the most however, is the cheek of some labour supporters. Denouncing the Conservatives like they have completely ruined our country, when in actual fact it was labour who were responsible, as well as the banks.

    I'm impartial by the way, however, I do sympathise with the tories. Their trying to make the most of a bad situation, and are being constantly harrassed by those not intelligent enough to realise that in actual fact, they have a mountain to climb before they even attempt "typical tory policies."
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    (Original post by WelshBluebird)
    It shouldn't. But if you have been brought up in that environment, it can be hard to shake off your pre-conceptions.
    Well maybe we should just focus our efforts into informing them, instead of just giving up like this.

    (Original post by WelshBluebird)
    And in that case why are we doing it? If it is going to cost more money, then what is the point? Why were the government going on about how we need to make sure the graduate and not the tax payer pays the most. (as I said, even when you take into consideration the funding cuts, if the average fee is over £7.5k then it will cost the taxpayer more).
    Why do it?
    A - you're assuming that you're right that it's definitely going to cost more. This assumes that student numbers stay the same, that the average fee is over 7500
    B - although it costs the government more, as I've already said it costs the poor less and the rich more. I don't classify a single person raking in £30000 a year as poor (two of them, household income of £60k, not poor!!). Everyone earning less than that is better off than they used to be.
    C - your calculations assume that all degrees will still be equally attended, the aim, however, is to create a market for degrees, so pointless degrees will be under attended, underfunded, and collapse.
    D - I've read up, and yes it costs money in the short term but actually this cost isn't quite what you think. They have concluded it's 50:50 that, if student numbers are maintained, it will cost money or save money in the long term.
    E - the only reason that it costs more, is because people will pay back less. so yes its costs the government more, but it costs individual people less. Except if you're rich, when it costs you a lot more. Both in normal tax and in 'graduate tax'.


    So yes, in the immeadiate future it's likely to cost the government more. But in the long run it could end up cheaper. Plus this assumes that student numbers remain the same, and depends vastly on inflation, future wages etc. Even if it doesn't, the increased cost will be picked up by the general tax payer, and by the higher earners (anyone above £30000). Therefore anyone below £30000 will be better off.
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    (Original post by GwrxVurfer)
    I did read it. Now I'm asking you to answer a question.
    Typically a 'lender' will have a certain deposit - say £10000.
    They will have lended out a certain amount - in banking this is often said to be restricted to around 10 times the deposit value. So they are owed £100000.
    They will have borrowed £100000 to be able to lend this money.

    They can't just decided that they have more money to lend out.

    Government is the same. They have very little compared to what they are owed and what they borrow. Governments can just decide to take money from 'thin air'. They could print money for example. Causing massive massive inflation. I'm sure you can think of a couple of examples of this.

    Most money is liquid. Money loaned every which way. Everyone making money on what they've loaned other people.

    Bad explanation of something hard to explain. You can keep trying to put what I said in a weird, unqualified context, or you can work it out for yourself if you really care. You seem incredibly hung up on it though.
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    I have recently talked to my MP. He is conservative and I was arguing my case against university cuts.

    People are right by saying that we need cuts. We borrow money from other countries and the world bank and the amount of interest they charge increases if we are seen as a country that is unlikely to pay it back. Therefore it makes sense to make heavy cuts.

    However, while public services are being slashed bankers and people who run large businesses are making obscene profits. Why should the cuts not affect them? The government is talking about how we need to make sacrafices while rich people get richer.

    The issue is not the extent of the cuts, it is who the cuts affect.
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    (Original post by storna)
    This is why:



    And, people are selfish. If cuts affect their job, the price of their education, and so forth - they campaign against cuts, regardless of how it will benefit the country as a whole and help reduce the deficit. People can't see beyond their own lives and many have an entitlement complex - they think that the state has an endless pot of money.
    I don't get why they don't I'm not good at finance at all and I don't understand the economy or anything, I asked a friend of mine once but he gave a very long winded and confusing explanation which didn't help AT ALL. What I want to know is, if the government print the money, why can't they just print themselves a couple of million squids? Or get the bank to add an extra 0 to their budget? I mean, where does money come from? Is there going to be a set amount that's going to stay the same for all time and beyond? Or does the amount of money in the world go up? I mean, the more the population grows, the more money we're going to need to go round, so where does it all come from?

    Ps. Sorry if I sounds reallly thick, I just always wanted to know
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    (Original post by emilymay)
    I don't get why they don't I'm not good at finance at all and I don't understand the economy or anything, I asked a friend of mine once but he gave a very long winded and confusing explanation which didn't help AT ALL. What I want to know is, if the government print the money, why can't they just print themselves a couple of million squids? Or get the bank to add an extra 0 to their budget? I mean, where does money come from? Is there going to be a set amount that's going to stay the same for all time and beyond? Or does the amount of money in the world go up? I mean, the more the population grows, the more money we're going to need to go round, so where does it all come from?

    Ps. Sorry if I sounds reallly thick, I just always wanted to know
    You're not too far off with the part in bold.

    The purpose of money is to facilitate transactions, every time you buy a good, or a service (eg paying for a haircut) you need money to carry out the transaction. Over time the economy grows, ie there are more goods and services and usually the population is growing as well. So when there's more goods and services you need more money to be in circulation to cope with all the extra transactions. So to keep things steady you need to increase the rate of money growth at the same rate as the economy grows. If the economy is growing and you just keep the amount of money fixed then that acts as a brake on the economy, no matter how many goods get produced, if nobody has the means to pay for the transactions, the money thats in circulation can't go round fast enough, so you get a completely pointless recession.

    That's why when there's a recession one of the first responses is usually the central bank increases the money supply (ie they print money), as its a lubricant, it gets the wheels of the economy moving again because people have cash to spend.

    Now if the money supply increases faster than the economy grows, then you're going to get inflation. If there's the same amount of goods in the economy and the same demand for transactions tomorrow as there is today, but tomorrow there's suddenly double the money, then all that will happen is prices will go up. If everybody has twice the amount of money to spend, everybody will be able to offer twice as much to pay for the same good, so it will bid up the price.

    Governments can print money to pay for government spending if they want. Basically there's three ways the government can pay for its spending commitments, either out of tax revenue, out of government borrowing (ie selling government bonds which pay a rate of interest) or by 'seignorage'. Seignorage is printing money, effectively it's like another tax because its a tax on the holders of money. Like I said before, if the money supply is increasing faster than the economy is growing, it will push prices up because money becomes worth less than it was before now there is more of it about. So when the government finances spending through printing money, it makes everybody else's money worth a bit less.

    Seignorage is a dangerous way to finance government spending because it leads to inflation rising very quickly, most of the time you get hyperinflations it is caused by a government printing money to pay for its spending commitments.
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    (Original post by GwrxVurfer)
    Ask yourself a question:


    The UK Government borrows their own national currency (Pounds Sterling), and this is known as the "National Debt". But where did the borrowed money originate?
    Banks, Other countries, Wealthy individuals, take your pick.
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    (Original post by emilymay)
    I mean, where does money come from?
    On this part, think of three things:
    1 - Coins and notes in peoples pockets and in shops tills etc
    2 - Money that is in peoples bank accounts that they can use to pay for things ie with a debit card or cheque
    3 - The reserves that banks themselves have (ie their balance with the central bank, like the Bank of England, that is where the banks have their own bank account)

    Banks borrow from depositors who deposit money in the bank/have their wages paid into the bank etc. They lend to people through providing mortgages, loans etc. So they owe their depositors and the people who they lend mortgages/loans to, owe them. If you think about it when you get your wages paid into the bank, the bank has your wages. It owes you that money, when you come to want it (ie to spend it).

    Banks use a system called 'fractional reserve' banking, what this means is, they don't keep the same amount in reserves, as the total amount they owe to depositors. This is because it's kind of a gamble that depositors aren't going to all want their money out at once straight away, people tend to just withdraw in bits as and when they need it. So they might use a reserve ratio of 10%, which means if the bank has £1000 of deposits in it, so it owes £1000, it will keep a reserve of £100. What does it do with the other £900? It lends it out.

    So this is how money gets created. Lets say the Bank of England wants to increase the money supply by £110 (I am using small numbers to make it easier to follow). It will buy an asset worth £10 from a bank (lets say the bank has a bond worth £10), and to pay for it, because the Bank of England has a printing press, it will just print a £10 note. So it has created £10 out of nothing. Now that bank has £10 less of bonds but it has £10 more of cash. It can't 'lend' a bond, if you want a bank loan you want them to give you cash not a bond, so now it has cash rather than a bond, it can lend. But remember we said they had a reserve ratio of 10%. That means if it increases its reserves by £10, it can increase the total amount it owes by £100. So it can lend out £100 to someone in the form of a loan. When it does that, there's £100 more in someones pocket in the economy, and that is more money to go round.

    So....by the Bank of England just printing an extra tenner, it has increased the money supply by £110, the bank it bought a bond from has got £10 more cash in its reserves....and the person the bank made the loan to has got £100 more cash in his pocket.
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    (Original post by MagicNMedicine)
    On this part, think of three things:
    1 - Coins and notes in peoples pockets and in shops tills etc
    2 - Money that is in peoples bank accounts that they can use to pay for things ie with a debit card or cheque
    3 - The reserves that banks themselves have (ie their balance with the central bank, like the Bank of England, that is where the banks have their own bank account)

    Banks borrow from depositors who deposit money in the bank/have their wages paid into the bank etc. They lend to people through providing mortgages, loans etc. So they owe their depositors and the people who they lend mortgages/loans to, owe them. If you think about it when you get your wages paid into the bank, the bank has your wages. It owes you that money, when you come to want it (ie to spend it).

    Banks use a system called 'fractional reserve' banking, what this means is, they don't keep the same amount in reserves, as the total amount they owe to depositors. This is because it's kind of a gamble that depositors aren't going to all want their money out at once straight away, people tend to just withdraw in bits as and when they need it. So they might use a reserve ratio of 10%, which means if the bank has £1000 of deposits in it, so it owes £1000, it will keep a reserve of £100. What does it do with the other £900? It lends it out.

    So this is how money gets created. Lets say the Bank of England wants to increase the money supply by £110 (I am using small numbers to make it easier to follow). It will buy an asset worth £10 from a bank (lets say the bank has a bond worth £10), and to pay for it, because the Bank of England has a printing press, it will just print a £10 note. So it has created £10 out of nothing. Now that bank has £10 less of bonds but it has £10 more of cash. It can't 'lend' a bond, if you want a bank loan you want them to give you cash not a bond, so now it has cash rather than a bond, it can lend. But remember we said they had a reserve ratio of 10%. That means if it increases its reserves by £10, it can increase the total amount it owes by £100. So it can lend out £100 to someone in the form of a loan. When it does that, there's £100 more in someones pocket in the economy, and that is more money to go round.

    So....by the Bank of England just printing an extra tenner, it has increased the money supply by £110, the bank it bought a bond from has got £10 more cash in its reserves....and the person the bank made the loan to has got £100 more cash in his pocket.
    I think I'm starting to understand, the last bit sounds awesome, but using what you said before (correct me if I've got this wrong!) they can't do that lots because then everyone just has more money, but whats available to buy hasn't increased in quantity, so the prices just go up?
    But why can't they just keep the prices down?
    Sorry if I'm asking too many silly questions! You don't have to answer
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    Can I just remind everyone that before Labour were kicked out of government in the biggest election swing since WWII, they sneaked a bill through parliament that imposed a statutory duty on the Treasury to cut the deficit by at least 50% by 2015.

    It's called the Fiscal Responsibility Bill and you can read about it here:
    http://services.parliament.uk/bills/...nsibility.html

    Thanks.
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    (Original post by emilymay)
    I think I'm starting to understand, the last bit sounds awesome, but using what you said before (correct me if I've got this wrong!) they can't do that lots because then everyone just has more money, but whats available to buy hasn't increased in quantity, so the prices just go up?
    But why can't they just keep the prices down?
    Sorry if I'm asking too many silly questions! You don't have to answer
    Well think about what determines prices. Say you were selling an old car, three people put in bids for it, £1000, £1200 and £1300. You're going to sell it for £1300. Now lets say the total amount of money in the economy had doubled overnight and everybody just had twice as much as they had before. So now those same people are doubly cashed up they will big £2000, £2400 and £2600. You aren't going to sell it for £1300 now you will sell it for £2600. The guy who would have bid £1300 yesterday, maybe he was willing to offer you 5% of his total wealth and thats what £1300 was. But if he has double the cash then if he offers you 5% of his total wealth thats now £2600. This is what happens if the amount of goods is unchanged but the money supply is higher, it just means people are willing to pay more.

    The same process works in shops as well, even though they don't directly work on auctions, if shops realise that people have more money in their pockets, but they don't have more goods to sell, they will have to put up the prices, otherwise if they kept everything the same price, there would be shortages of supply compared to demand. Can you imagine if the money supply suddenly doubled, and Armani kept the prices of their jackets the same, every chav would be down the Armani store waving wads of cash, buy up all the jackets, they'd get a new delivery, and they'd sell out again the next day, and then the managers would actually realise, hmm something's not right here, we could be making more money on these, if everyone's so able to pay, put the prices up.

    If the government tried to impose price controls then what would happen is you would get shortages. The price mechanism is what regulates supply and demand so that there aren't shortages (ie more people wanting to buy something than there is supply of it). If everybody suddenly had more money in their pockets, and hence more ability to spend, and there wasn't an increase in goods, then it would just be first come first served at the shops and when it sells out, tough.
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    Because the exageration of the sovereign risk has been used as a guise, under a course of events not disimiliar to that of the shock doctrine, to dismantle the welfare state. Stimulus as opposed to austerity is an important stopgap measure to rehabilitate to private sector - the economy in its stagnatory post-recession state is too fragile for the immediacy of the austerity measures - lower output means lower unemployment (leading to the degradation of human capital, a process of hysterisis), tax receipts will suffer, while cutbacks in infrastructure, technology and education will spell yet worse for the future. The sheets can be balanced come economic rehabilitation. The neoliberal prescription that deficit reduction stimulates investment is fantasy and has been disproved by historical precedent.

    And even if cuts have to be made now, their allocation seems ill-placed in relation to hurting the most vulnerable - with a £39bn annual defence budget (not including operational activities - of course now including the estimated £200m+ for Libyan intervention), with an estimated £95bn of tax revenues lost through tax evasion, and with pre-crash bonus levels re-establishing themselves after £1tn of public money having been pumped into the banks - why are public services bearing the brunt.
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    (Original post by emilymay)
    I think I'm starting to understand, the last bit sounds awesome, but using what you said before (correct me if I've got this wrong!) they can't do that lots because then everyone just has more money, but whats available to buy hasn't increased in quantity, so the prices just go up?
    But why can't they just keep the prices down?
    Sorry if I'm asking too many silly questions! You don't have to answer
    Which part of Cheshire are you from? e.g. North, south, etc. Dont want an actual place name or anything.
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    (Original post by wilson_smith)
    Because the exageration of the sovereign risk has been used as a guise, under a course of events not disimiliar to that of the shock doctrine, to dismantle the welfare state. Stimulus as opposed to austerity is an important stopgap measure to rehabilitate to private sector - the economy in its stagnatory post-recession state is too fragile for the immediacy of the austerity measures - lower output means lower unemployment (leading to the degradation of human capital, a process of hysterisis), tax receipts will suffer, while cutbacks in infrastructure, technology and education will spell yet worse for the future. The sheets can be balanced come economic rehabilitation. The neoliberal prescription that deficit reduction stimulates investment is fantasy and has been disproved by historical precedent.

    And even if cuts have to be made now, their allocation seems ill-placed in relation to hurting the most vulnerable - with a £39bn annual defence budget (not including operational activities - of course now including the estimated £200m+ for Libyan intervention), with an estimated £95bn of tax revenues lost through tax evasion, and with pre-crash bonus levels re-establishing themselves after £1tn of public money having been pumped into the banks - why are public services bearing the brunt.
    So many things wrong with that statement I dont no where to begin.
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    (Original post by T.I.)
    So many things wrong with that statement I dont no where to begin.
    Go ahead, please
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    (Original post by wilson_smith)
    Go ahead, please

    (Original post by wilson_smith)
    Because the exageration of the sovereign risk has been used as a guise, under a course of events not disimiliar to that of the shock doctrine, to dismantle the welfare state. Stimulus as opposed to austerity is an important stopgap measure to rehabilitate to private sector - the economy in its stagnatory post-recession state is too fragile for the immediacy of the austerity measures - lower output means lower unemployment (leading to the degradation of human capital, a process of hysterisis), tax receipts will suffer, while cutbacks in infrastructure, technology and education will spell yet worse for the future. The sheets can be balanced come economic rehabilitation. The neoliberal prescription that deficit reduction stimulates investment is fantasy and has been disproved by historical precedent.

    And even if cuts have to be made now, their allocation seems ill-placed in relation to hurting the most vulnerable - with a £39bn annual defence budget (not including operational activities - of course now including the estimated £200m+ for Libyan intervention), with an estimated £95bn of tax revenues lost through tax evasion, and with pre-crash bonus levels re-establishing themselves after £1tn of public money having been pumped into the banks - why are public services bearing the brunt.
    Well the most basic and easiest bit is the £95bn figure is completely wrong, more like 17ish.

    The Libyan intervention will cost easily more than a billion, probably several, no where near the 200mill you mentioned (eash missile is around £800k and it costs around £40k an hour to fly a plane). The money pumped into the banks shall be returned...eventually, but how else do you suggest increasing revenue?

    Introducing 80% income tax?, add an extra £1 per litre of fuel, make council tax "£20k, i think you see my point. The government needs to in the next few years need to carry out a major financial change, the changes they are implementing now are only going to decrease the defecit for the actual year compared to the previouse, we are not even paying it back yet.

    Other things wrong as well, but I simply CBA to talk about them.
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    (Original post by T.I.)
    Well the most basic and easiest bit is the £95bn figure is completely wrong, more like 17ish.

    The Libyan intervention will cost easily more than a billion, probably several, no where near the 200mill you mentioned (eash missile is around £800k and it costs around £40k an hour to fly a plane). The money pumped into the banks shall be returned...eventually, but how else do you suggest increasing revenue?

    Introducing 80% income tax?, add an extra £1 per litre of fuel, make council tax "£20k, i think you see my point. The government needs to in the next few years need to carry out a major financial change, the changes they are implementing now are only going to decrease the defecit for the actual year compared to the previouse, we are not even paying it back yet.

    Other things wrong as well, but I simply CBA to talk about them.
    The figures are nothing conjectural - the £95bn figure is from Tax Research UK, the £200m (I put '+' due to the questionability of duration, in which the cost could well sky-rocket) figure is from Malcolm Chalmers, a leading defence economist from the Royal United Services Institute. Care to cite your contradictory sources?

    No idea what you're talking about in your third paragraph, how is that relevant to what i said?

    EDIT: Missed the end of the second paragraph, meaning the third paragraph didn't make much sense - my bad.

    By capping bonuses? By not cutting corporation tax? By not cutting staff at the HMRC? By restructing the banking system so they play they're societally valuable role of providing credit rather than placing externalities on us all? And if you allocate public investment properly it will yield tax returns to offset the deficit increase (as well as averting the social cost) - as opposed to a neoliberal likened program in which lower tax revnues combined with lower growth lead to a high national debt and an even higher debt-to-GDP ratio, potentially inducing a double-dip.
 
 
 
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