Current Affairs EU In or Out

[Barnfred 55]

when does rationing start?

As soon as article 50 is invoked. Toblerones and Marmite are amongst the first products to be rationed I believe.

 

[Foot Long Hot Dog]

So, after labour's spending spree and spending promises which were now built into the system, debt went up by £145bn, £93bn, £110bn, £107bn, £87bn and £44bn, I'm sure you can see a downward trend here as the mess Brown left behind was dealt with. Also that £122bn doesn't look that big amongst all these numbers does it...........

It makes the supposed £8BN 'saving' from leaving the EU seem positively insignificant eh mate....

 

[The Esk]

Isn't a big chunk of this debt (around £400bn) due to the governments quantitative easing policy, introduced to stimulate spending and growth and prevent negative inflation, if that's the correct term.? It's not real debt in so far as it is owed to the Bank of England and any interest due is passed straight back to the exchequer.

My understanding is that once the economy recovers and there is no requirement to keep interest rates low, these debts will be gradually erased, and in the meantime it's not actually costing that tax payer anything in interest. So the picture, if I'm correct, is not quite as bad as it looks, as between £2/300bn of the debt increase since Tories came to power is really only a paper debt, effectively to themselves.

Happy to be corrected Esk if I'm wrong. I know you have a good understanding of these things.

Not quite mate.

QE is when the BoE creates electronic money which allows the bank to buy debt (either Government debt or corporate debt) in a reverse auction process. The BoE says it wants to buy bonds of a certain duration say 5 years, 10 years or 15 years as an example, and asks holders of those bonds to sell them to the bank, buying the lowest offers. In return the BoE puts cash into the hands of investors and banks. That has two effects. The fact that they're buying debt pushes the price of existing debt up and thereby reduces the yields payable on the debt making future debt cheaper for the Government, and secondly and most crucially it provides the banks and institutions with cash to lend and invest in the real economy.

In practice not much of this cash has stimulated real growth, it has however pushed up asset prices around the world.

Between 2007 and 2015 the BoE created £375 bn of new cash to buy bonds, and a further £60bn in August of this year to counter the immediate effects of Brexit.

So the debt is real and needs to be repaid, both in terms of servicing the debt (interest payments) and finally paying back the debt.

 

[The Esk]

So, after labour's spending spree and spending promises which were now built into the system, debt went up by £145bn, £93bn, £110bn, £107bn, £87bn and £44bn, I'm sure you can see a downward trend here as the mess Brown left behind was dealt with. Also that £122bn doesn't look that big amongst all these numbers does it...........

The £122bn is the estimated increase in borrowing, not the total borrowing over the next 3 years - total borrowing is estimated to now be £220 bn over this period.

It will be the direct cost of Brexit.

It's 348 x the leave campaign (false) estimation of our EU weekly gross contributions.

 

[magicjuan]

i dont really understand this? why were they trying to cause a factional split? to try and get a remain vote?

The answer to that lies further down the road. Again some will call it conspiracy and it is, but the theory element is losing its potency as time passes. We are moving into full blown corporate fascism, the 'snoopers charter' enshrined earlier this week is another cog in the machine.
Mussolinis fascist definition.
Across the west we are shifting ever more rightwards and a divided and confused population is easy to lead to 'solutions'.
The EU was modelled on a fascist ideal. It had a goal of a federalist superstate, but the puppet masters, the ones Wilson called 'the gnomes of Zurich' are now guiding a power grab on their terms of totalitarianism, with governments and presidents de facto pawns.

As I say some will call it conspiracy, but usually because the term fascism invokes images of jackboots on foreign soil where the means of wealth were physical. These days wealth is theoretical, numbers on a screen, and its only validity is the acquiescence of the proles, (or 'golem' as one of Trump Spunkets minions used this week in a public setting, a word lifted from the protocols of zion and not used since 30s Germany), to allow and accept a subservience to an inequal system.

Divide and conquer I could have written, but brevity is an alien concept to me

 

[magicjuan]

Not quite mate.

QE is when the BoE creates electronic money which allows the bank to buy debt (either Government debt or corporate debt) in a reverse auction process. The BoE says it wants to buy bonds of a certain duration say 5 years, 10 years or 15 years as an example, and asks holders of those bonds to sell them to the bank, buying the lowest offers. In return the BoE puts cash into the hands of investors and banks. That has two effects. The fact that they're buying debt pushes the price of existing debt up and thereby reduces the yields payable on the debt making future debt cheaper for the Government, and secondly and most crucially it provides the banks and institutions with cash to lend and invest in the real economy.

In practice not much of this cash has stimulated real growth, it has however pushed up asset prices around the world.

Between 2007 and 2015 the BoE created £375 bn of new cash to buy bonds, and a further £60bn in August of this year to counter the immediate effects of Brexit.

So the debt is real and needs to be repaid, both in terms of servicing the debt (interest payments) and finally paying back the debt.

In reality the soveignty of nations is now owned by corporations? We're mortgaged to the hilt and will probably default

 

[Barnfred 55]

Not quite mate.

QE is when the BoE creates electronic money which allows the bank to buy debt (either Government debt or corporate debt) in a reverse auction process. The BoE says it wants to buy bonds of a certain duration say 5 years, 10 years or 15 years as an example, and asks holders of those bonds to sell them to the bank, buying the lowest offers. In return the BoE puts cash into the hands of investors and banks. That has two effects. The fact that they're buying debt pushes the price of existing debt up and thereby reduces the yields payable on the debt making future debt cheaper for the Government, and secondly and most crucially it provides the banks and institutions with cash to lend and invest in the real economy.

In practice not much of this cash has stimulated real growth, it has however pushed up asset prices around the world.

Between 2007 and 2015 the BoE created £375 bn of new cash to buy bonds, and a further £60bn in August of this year to counter the immediate effects of Brexit.

So the debt is real and needs to be repaid, both in terms of servicing the debt (interest payments) and finally paying back the debt.

Ok Esk. I thought the BOE bought the bonds directly from the Govt but what you're saying is that they were sourced through the market, presumably pensions and financial institutions. I understand that

But isn't it the case then that the government, via the BOE, purchased back it's own debt in an effort stimulate the economy. Effectively to replace the money that the banks weren't lending at the time. So the BOE now own these Government debts plus probably a few high rated corporate bonds, and the interest that they receive on them, including that payable on government gilts, goes straight back to the treasury. So the increase in government debt, created when the BOE generated electronic money, is fully covered by the value of their own gilts and blue chip bonds. Similar to an offset mortgage.

The debt is still there of course. But they have assets to cover it. Or am I still being incredibly stupid?

 

[Barnfred 55]

The £122bn is the estimated increase in borrowing, not the total borrowing over the next 3 years - total borrowing is estimated to now be £220 bn over this period.

It will be the direct cost of Brexit.

It's 348 x the leave campaign (false) estimation of our EU weekly gross contributions.

In your opinion mate.

Actual UK growth has been lower than forecast for a number of years and that is what is creating the hole in our income. It may or may not be worse due to Brexit, but it's all forecasts and speculation and they've been getting that wrong for years.

 

[roydo]

they've been getting that wrong for years.

I would hazard a guess, that not one economic forecast, up, down, or sideways, has never, ever been right.

Its the definition of an Economist. Someone who sees something happen for real, then proves it in a theory.

 

[Barnfred 55]

I would hazard a guess, that not one economic forecast, up, down, or sideways, has never, ever been right.

Its the definition of an Economist. Someone who sees something happen for real, then proves it in a theory.

I remember doing economics A level mate (just about sadly) and I just waffled a load of crap for 3 hours and ended up getting a B. Didn't have a clue what I was talkin about. It's one of those topics that is more a point of view than an actual science. Economic forecasting is like betting on horse racing and football. You can have all the stats and past performance figures you like, but at the end of the day you're just guessing.

 

[JonS]

Let's be honest, 95% of leave are racist bigots.

That's a strong statement mate, and half the country you are talking about.

So if we had a worldwide single market and customs union instead of just an EU one, would you be in favour of freedom of movement worldwide to go with it or not and if not does that mean you are racist too?

 

[The Esk]

But isn't it the case then that the government, via the BOE, purchased back it's own debt in an effort stimulate the economy. Effectively to replace the money that the banks weren't lending at the time. So the BOE now own these Government debts plus probably a few high rated corporate bonds, and the interest that they receive on them, including that payable on government gilts, goes straight back to the treasury. So the increase in government debt, created when the BOE generated electronic money, is fully covered by the value of their own gilts and blue chip bonds. Similar to an offset mortgage.

The debt is still there of course. But they have assets to cover it. Or am I still being incredibly stupid?

The assets are created by the BoE pumping money into the banks and institutions which in turn (the theory goes) put that money to real use by lending an investing in the real economy. In practice the banks particularly just used the funds to repair their own balance sheets more cheaply than they were able to do so themselves.

The BoE is owned indirectly by the Government, so in a sense you are correct, however as we agree the debt is real, and requires re-paying or re-financing at some point in the future.

 

[Joey66]

Blame Brexit we have not left yet ?
The economy is run on low wages low tax receipts again raising the tax levels to eventually £12000 should only be for pay under 25k there is a massive black hole in that problem- the people above that should pay more tax to burden the shortfall of income!
Part time jobs reduce NI collection too!

 

[Barnfred 55]

The assets are created by the BoE pumping money into the banks and institutions which in turn (the theory goes) put that money to real use by lending an investing in the real economy. In practice the banks particularly just used the funds to repair their own balance sheets more cheaply than they were able to do so themselves.

The BoE is owned indirectly by the Government, so in a sense you are correct, however as we agree the debt is real, and requires re-paying or re-financing at some point in the future.

I get the first bit mate. QE didn't work very well and the greedy banks are most likely at the head of the queue if you're looking for reasons why.

It's the second bit I'm having trouble explaining but in my own head it all seems so straight forward and simple. The £400bn+ released via QE was done via the BOE purchasing debt, mainly Govt gilts. We agree on that.

The BOE now own in theory £400bn+ (subject to price fluctuation), We presumably agree on that.

The BOE is owned indirectly by the Govt. We agree on that.

So the next logical step to take from there is that the Govt owns it's own debt and is paying interest to itself. And when it repays the debt on maturity the payment is actually going back to itself is it not? I think this is the point I'm trying to get across that we don't seem to agree on.

If I'm doing your head in mate just ignore it. I'm happy to be blissfully unconsciously incompetent

 

[peteblue]

Which is quite scary when you think total government spending is ~ £750bn, so the government was spending roughly 13% more than it earned during that six year period, which was a time of apparent austerity and huge budget cuts.

So what you're saying was there was no austerity, which is what I said at the time.........