tony de wonderful

With yearly payements approaching almost £50 billions does anyone know who gets this money? It seems we pay a lot of tax so these people can get goods and services for free?

DCI Gene Hunt

The private sector and other purchasers of UK gilts.

kingofturds

iTrader: (1)

tony de wonderful

It's ****ed. We are having to undergo austerity and higher pensionable ages so they can get rich.

They are like feudal overlords.

A wealth transfer.

GlesgaKiss

I thought from things you've posted before that you knew how money came into existence? It's all debt. That's the federal reserve I read about, but presumably the BoE works in much the same way. It's a strange system, although it's clearly brought us quite a lot. Who knows if sound money would have worked better or worse.

Tidgy

perhasp the government should right of debt to the public sectors (sinc emost is to banks) due to there duckups causing the recesion

GlesgaKiss

Don't see the prob with the private sector owning bonds and expecting interest btw.

Tidgy

personaly i think it depends who it is, if its banks, then screw em, freeze any payments to them, anyone else i don't have an issue with.

Petem95

But then when the government NEEDS to raise money, there will be less people willing to buy them and likely result - rates go up, and it costs the tax payer more...

tony de wonderful

Yeah exactly, the government would not be able raise money and the pound would probably collapse.

tony de wonderful

Sure but I'm thinking about the real economics of wealth (goods and services) that exists under the financial world.

We borrow money from abroad and institutions - run a deficit - which effectively allows us to misallocate resources to the public sector - then for that privilege we promise to transfer a % of our national wealth to said institutions over the next 20, 30 years.

It makes no sense 'cos we never borrowed wealth from them in the first place only paper money.

A socialist economy can misallocate wealth by fiat, we must surrender future wealth instead.

Odd?

hodgy0_2

as I said in the below post a few days ago - there has been a massive transfer of wealth from the poor to the rich

https://www.scoobynet.com/showpost.p...8&postcount=19

cster

What evidence can we see to back this assertion?
It has the ring of a leftist article of faith to me.
Would like to be shown otherwise.

fivetide

iTrader: (1)

Its not quite how it works, it has more in tune with not being able to raise finance in future.

Essentially, we don't go to overseas firms and say "lend us a billion and by the way, what's the interest rate?"

The governemnt issues bonds and gilts to the value needed and applies a rate of interest. Companie setc then buy those up. As the chart shows, pension companies have been big backers in the past because it offers a steady return and gives them a pot to pass on in case you live for quite a few years.

Messing around with the system would mean that the government would have to offer high rates of interest to attract investment and make the problem worse.

Essentially, there is no need to borrow from abroad at all, we just sell to whoever buys.

Misallocation of resources stands though. Along with private firms ripping us all off. See the Nimrod disaster, now destined for the bin. 8 years late and less than half of what was promised would have been delivered. Damn right its been cancelled.

5t.

GlesgaKiss

That's the bit I'm interested in. It does seem that what we're doing now is the equivalent of someone who's up to their eyeballs in credit card debt taking out more credit cards so that they don't have to see a drop of their standard of living. It's totally pointless when you take a down-to-earth long-term view - all we're doing is funding the unproductive. But this is politics we're talking about.

Trying to keep an open mind about it all, as it would be good to be proved wrong, but can't see how a real recovery can take place when the goal seems to be rising GDP which will be comprised mainly of consumption? That surely is an economy getting into worse shape.

Also not sure what good the central banks think QE is going to do either. They can stimulate activity but not necessarily productivity. It's interesting how QE is being touted as this magical cure that will make us all richer if things look to be taking a turn for the worse, yet they are so hesitant to use it. I mean, if it's guaranteed to work why not get the printing presses fired up immediately? It either works or it doesn't.

Fivetide - You say that the government applies a rate of interest to bonds, but remember there is supply and demand involved. If no one wants to buy them then then the interest due on them will go up. If people start to suspect that the chances of them actually getting paid back are slim, or if they think they may be paid back in substantially depreciated currency further down the line, then yields will rise. Obviously private individuals and companies buying bonds with their savings is favourable though.

The demand from abroad for bonds seems to come from the places we send our paper to. What else are they going to do with it, it's not like we can provide them with much. So they seem to be lending it to us again in return for more paper. What are they going to do with that when they get it I wonder? China has Trillions worth of Dollar reserves. What can they do with that money? A genuine question, by the way, I'm interested.

dunx

iTrader: (3)

They can bankroll their ever increasing energy costs...

Can we ?

fivetide

iTrader: (1)

Correct. That's why is said "Messing around with the system would mean that the government would have to offer high rates of interest to attract investment and make the problem worse."

Just trying to clarify the point that debt and credit are not exactly the same thing.

5t.

tony de wonderful

Maybe as a leftist soundbite but nevertheless that is what has happened even if it was not by design. We see financial/capitalist elites getting massive bonuses, their business getting bailed out by the state, but now we are being taxed more and public spending cut, pension age is increased, we're taking on more debt etc.

tony de wonderful

How does QE do anything different than the government getting cash from selling its debt?

What is actually happening here though, are we consuming their surplus? It's not just a paper exchange surely?

Leslie

When it comes to austerity I would imagine you don't have the slightest idea of what that is really like. We are still living the life of Riley compared to what the Brits had to put up with after WW2. Food rationing did not stop until 1954!

NL borrowed and borrowed on the strength of our A1 status in order to make the economy look strong which it was not in real fact, we were just not earning enough to pay for their mindless grossly expensive government spending. They were effectively spending our grandchildren's money! They also used PFI so that all looked good at the time but it still needs to be paid for,as well as the interest on that too!

You have quoted the annual interest payments we have to find. It is worth dwelling on that for a moment! And we are still having to borrow money off Peter to pay Paul!

It took NL 4 years to destroy the strong economy they were left with in '97 and their incredible wasteful and useless spending spree all on the borrowed cash for the next 9 years has dumped us in the hole we are in now!

You should hope and pray that we don't descend into the real austerity that was our lot after WW2.

Les

hodgy0_2

As TDW has pointed out -- it is not really a matter of left or right, it is just what I see is happening in the US/UK economies

my post on the child benefit thread sums up my view

https://www.scoobynet.com/showpost.p...&postcount=102

cster

I was more hoping for some facts and figures as I am wary of quoting soundbites without being able to back them up in some way.
As an example - A friend of mine made the comment (in the Pub) that Thatcher destroyed manufacturing in the UK. Everyone (well the "right minded") nodded and murmured in agreement.
I had heard somewhere that this was not the case and that this was just part of an historical decline in manufacturing. On checking out the figures from the ONS for manufacturing as a percentage of GDP I was surprised to see that not only was the rate of decline under her rule less than that of the two labour governments before her, but was also less than that under Major.
I was even more surprised to see that the rate of decline under Blair was almost three times as sharp.
Yet we don't seem to hear about Blair as the destroyer of British manufacturing do we?
It just seems to be a case of people believing whatever happens to agree with their particular view of the world. This tendency does indeed make us easy prey to spin and we should be guarded IMO.

dunx

iTrader: (3)

Having lived through both periods... the worst is yet to come.

The rich get richer on the backs of the poor.

dunx

P.S. You do need politics to work that one out.

cster

Well I guess the acid test on that one is whether the poor are better off (financially as we are speaking of wealth) as time passes.
It stands to reason that rich people are successful risk takers and will indeed tend to become richer (although some may not).
They say that education is the ladder of social mobility and I agree with this.
I wonder if many of "the poor" tend to hold this view. If they do, it does not appear to be very evident.
IMO the last government seemed to have the policy of throwing money at them and TBH, I can't think of a much more effective way to keep them in their place.

kingofturds

iTrader: (1)

I remember at school one of the old school teachers always used to say "welfare was not designed to help the poor it designed to to protect the rich", "and it's the mugs in the middle that pay for it".

Leslie

Plenty of evidence for that alright!

Les

GlesgaKiss

When the bonds are sold to private individuals and companies like you mentioned above, the currency used to purchase is already in circulation. Whereas when the central banks buy bonds, the money is just created out of thin air for the purpose. So one of them inflates the money supply and one does not.

It seems that way. I'm sure I have a pretty simplistic grasp of it though. It looks like a bit of a con really, but it's not all the west's fault. Why is China keeping the Yuan pegged to the Dollar for one? Because receiving paper in exchange for work doesn't seem like a great deal for the Chinese workers. That's communism for you though.

If they let the Yuan trade freely then the Chinese citizens would have more purchasing power for their productivity and would be able to consume more of what they produce themselves. This artificial exchange rate is probably helping a few at the top with power get very wealthy in China, and obviously enabling America to run a 'consumer economy' - circulating confetti and buying stuff of real value with it.