Very basic questions about our economy and politics.

[practitioner 10]

This is going to be really simple for the people who work or are just interested in politics and economy.

 

I myself have never really looked into any of it in any depth, so if you can help it would be appreciated.

 

1. To whom do we owe this debt thats causing all the cuts.

 

2. Are all the countries on earth in financial debt.

 

3. Why all of a sudden do these cuts need to be made, if they were not made what would be the realistic implications of it.

 

4. Why doesn't the royal family fork out? I maybe in for a battering here but I'll ask anyway what have the royal family done, and do they serve any purpose at all.

 

Im sure there is more I wanted to know but as always when its time to ask you forget.

Edited June 25, 2010 by practitioner

[KellieB 10]

This is going to be really simple for the people who work or are just interested in politics and economy.

 

I myself have never really looked into any of it in any depth, so if you can help it would be appreciated.

 

1. To whom do we owe this debt thats causing all the cuts.

 

2. Are all the countries on earth in financial debt.

 

3. Why all of a sudden do these cuts need to be made, if they were not made what would be the realistic implications of it.

 

Im sure there is more I wanted to know but as always when its time to ask you forget.

 

1. After Labour printing money and buying its own debts, we owe ourselves. We also owe the Americans and the Asian markets but most notably we are borrowing from China who Labour listed as a Country not to do business with because of their record on "human rights."

 

2. Yes, all Countries are in financial debts. Some choose to use the credit card to pay off the mortgage. (Nu-Labour)

 

3. The cuts had to come sooner or later when you spend more than you earn. The realistic implications of not taking control is that you go bust and everyone loses what they originally owned. I know its a mad concept and it creates wars but it is a fact,

[*_ash_* 88]

This is going to be really simple for the people who work or are just interested in politics and economy.

 

I myself have never really looked into any of it in any depth, so if you can help it would be appreciated.

 

1. To whom do we owe this debt thats causing all the cuts.

 

2. Are all the countries on earth in financial debt.

 

3. Why all of a sudden do these cuts need to be made, if they were not made what would be the realistic implications of it.

 

4. Why doesn't the royal family fork out? I maybe in for a battering here but I'll ask anyway what have the royal family done, and do they serve any purpose at all.

 

Im sure there is more I wanted to know but as always when its time to ask you forget.

 

I think the whole thing is based on 'interest', and ability to pay loans back.

 

I think only about 10% of 'money' is actually hard cash. For example, when you get a loan from the bank for a house, there isn't physically $100,000 of cash for the loan. There is just a promise that you have the ability to pay back the money with interest. Since people [collectively] are paying more than they borrowed, then more money has to come from somewhere, so others have to also borrow money, otherwise it would all dry up.

 

I think that the only way Capitalism can work is if there is a fine balance with borrowing and spending. i.e You can't just print money, it has to be borrowed with interest.

 

I'm happy to be corrected, but that's my take on it.

[epiphany 10]

Well I'm no expert obviously but here's my take because I find all this rather interesting.

 

1. Our economy is dominated by private investment and commercially created credit. Understanding that simple fact tells you to whom we owe the debt.

 

2. Not sure if ALL countries are in debt but I imagine most are since most established economies are debt-based economies. It's worth pointing out that debt itself is not the problem - compound interest is, and is something most people are pitifully unaware of. As pointed out by Albert Bartlett, "The greatest shortcoming of the human race is our inability to understand the exponential function".

 

3. The easiest way to understand why cuts are needed is to use the analogy of you getting into personal debt and seeing that debt grow and grow because you spend beyond your means. However, few politicians are willing to admit this is not the root of the problem.

 

4. The Royal Family will not fork out because they don't have to. It's as simple as that. They are more concerned about keeping their own house in order.

[Wildcat 10]

 

3. The easiest way to understand why cuts are needed is to use the analogy of you getting into personal debt and seeing that debt grow and grow because you spend beyond your means. However, few politicians are willing to admit this is not the root of the problem.

 

 

Your analogy is a fallacy of composition, because if everyone was thrifty, demand would go down lowering the value of savings and reducing economic growth.

 

The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. The paradox is, narrowly speaking, that total savings may fall even when individual savings attempt to rise, and, broadly speaking, that increases in savings may be harmful to an economy.[3] Both the narrow and broad claims are paradoxical within the assumption underlying the fallacy of composition, namely that what is true of the parts must be true of the whole. The narrow claim transparently contradicts this assumption, and the broad one does so by implication, because while individual thrift is generally averred to be good for the economy, the paradox of thrift holds that collective thrift may be bad for the economy.

 

http://en.wikipedia.org/wiki/Paradox_of_thrift

[growler 10]

Why don't we cut some of the billions we send out of the country in foreign aid. Start sending it again when we can afford it.

[taxman 12]

Why don't we cut some of the billions we send out of the country in foreign aid. Start sending it again when we can afford it.

 

Foreign aid is a drop in the ocean. Besides it is in our own self interest to have stable countries and governments all over the world rather than stateless anarchies like Somalia.

 

That's not to say all overseas aid actually works, but that's the idea.

[Cavegirl 10]

1. To whom do we owe this debt thats causing all the cuts.

 

This page is a good starting point for this-

http://news.bbc.co.uk/1/hi/business/8530150.stm

 

The largest holder of UK bonds are Insurance Companies & pension funds.

The 2nd largest holder of the UK's bonds is labelled as 'Overseas'. Unfortunately the data as to who these overseas countries are is not published by the BoE.

 

However, it is critical because any country that owns your bonds has a great degree of power over the political decisions that your country makes. They can demand that you make cuts, they can prevent you from developing an industry that would be in competition with their own and many many other examples.

 

In 2009 the Bank of England became the 3rd largest holder of UK bonds. This means that we bought our own debt in order to flush more money into the UK economy- thus creating money from nothing. This is also known as quantitative easing and it leads to inflation, because more money in the system devalues the amount that each pound is worth.

 

2. Are all the countries on earth in financial debt.

 

I think all countries are in debt, but some manage it better than others. Australia for example, was barely affected by the global crash because it was in a good economic position prior to the crash. It never went into recession. Israel also did not experience a recession. In fact an Israeli friend of mine actually said to me- "Is there really a global recession? We haven't heard anything about it".

 

3. Why all of a sudden do these cuts need to be made, if they were not made what would be the realistic implications of it.

 

The cuts are being made to reduce the deficit only (the interest on the debt)- the actual debt the country owes will continue to rise. If the deficit was not reduced the debt would just grow larger faster. This is necessary because it means that we can continue to borrow money at low interest rates. However, the rate and extent of the cuts needed has been disputed by each political party.

 

4. Why doesn't the royal family fork out? I maybe in for a battering here but I'll ask anyway what have the royal family done, and do they serve any purpose at all.

 

I don't know anything regarding the numbers on this- money spent on the family verses amount of business and revenue they attract to the country so I can't offer anything useful I'm afraid.

 

This is an excellent overview of the US economy. It takes a while to get going, but it provides all the information you need to know about how their economy works and the UK works along similar principles-

 

 

In his 'Crash Course' Chris Martenson discusses- exponential growth, how money is created, how infinite growth cannot occur on a finite planet, the history of US banking, inflation, Peak oil and diminishing natural resources. He comes to the conclusion that the next 20 years will be very different from the past 20 years and I can't recommend it highly enough.

Edited June 25, 2010 by Cavegirl

[epiphany 10]

In his 'Crash Course' Chris Martenson discusses- exponential growth, how money is created, how infinite growth cannot occur on a finite planet, the history of US banking, inflation, Peak oil and diminishing natural resources. He comes to the conclusion that the next 20 years will be very different from the past 20 years and I can't recommend it highly enough.

 

This is essential reading/watching!

[Randy 10]

This is essential reading/watching!

 

No, it's alarmist conspiracy theory claptrap. The problem with the internet is that it gives a platform to any old nutter, who can pass themselves off as an expert on subjects they know little about, and Chris Martenson is a classic example.

[Cavegirl 10]

No, it's alarmist conspiracy theory claptrap. The problem with the internet is that it gives a platform to any old nutter, who can pass themselves off as an expert on subjects they know little about, and Chris Martenson is a classic example.

 

No the problem with Sheffield Forum is that it gives a platform to any poster who likes to dismiss everything as 'conspiracy theory claptrap' whilst not having any expertise and Randy is a classic example.

[Vague_Boy 10]

1. To whom do we owe this debt thats causing all the cuts.

 

Some of it to ourselves (as already mentioned). Around £198 billion of the £200 billion of Quantitative Easing was apparently used to buy UK gilts.

 

So we've got one part of the UK government using dreamed up money to buy debt from.... itself.

 

Does anyone really think this will end well?

 

 

2. Are all the countries on earth in financial debt.

 

Most of the major debtor nations are in the West. Most of the creditor nations (such as China) are in the East. The major exception here is Japan, which is mired in horrendous debt.

 

3. Why all of a sudden do these cuts need to be made, if they were not made what would be the realistic implications of it.

 

The issue has been around for a long time. Perhaps in an era of prosperity (or do I mean "prosperity"?), it doesn't seem to matter as much. Once the party came to a crashing halt in 2008, things looked very much more like they really are (i.e. fooked).

 

The consequences? Well, look at Greece. There could be a Bond crisis, a run on the pound, leading in turn to massive hikes in interest rates leading inevitably to a swathe of mortgage defaults and repossessions.

 

Make no mistake though, the destructive course we're on can't be fixed by tinkering around the edges. And frankly, I doubt if any politician today has the cojones to do what's really necessary (plus the public would bitch and moan and whine about it too much).

 

So "beans on toast" Britain is pretty much a certainty. Enjoy!