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Increasing borrowing to reduce borrowing.


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Some people, both on here and in europe, seem to think that if we continue to increase borrowing so fund public sector spending over and above what the tax take allows then this will reduce the deficit.

 

However under labour they did this every single year. And every year the deficit increased, the national debt increased hugely and the percentage of GDP spent puring on servicing the interest on debt increased to the point where it's the 5th largest "department" of government by budget.

 

So given that it did not work, over 10 years, to reduce the deficit why will it magically do the opposite of what it always has done this time?

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There was growth before Andy.

 

Theres no green shoots now.

 

Most people who believe in reducing both the state and the debt, also believe we need to also, right now, invest to get that growth.

 

Personally, i think whatever plan you put out there now, chaos is going to ensue anyway. The financial markets are in complete abyss, the sooner it breaks down and we find an alternative, the better.

 

btw, i am not saying there is anything wrong with capitalism, but what we have now is state sponsored capitalism, and its well & truly skewered.

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There was growth before Andy.

 

So it's actually even worse than he suggests? Increased borrowing while the economy is growing leads to ever-bigger problems, so increased borrowing while it's stagnant would make them even bigger even faster?

 

It's good of you to point that out.

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The debt must be cancelled.

 

We can then implement both land and monetary form. Full employment within a few months. More equitable share of the production for the common man, and more importantly, increased production.

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Its very simple.A farmer has had his mortgage repayments increased to the point where he cannot buy seed and fertiliser.The bank allows a repayment holiday ,the farmer buys seed and uses the proceeds of the harvest to repay his debts.Borrowing has enabled the farmer to utilise his resources,increase output and facilitated debt repayment.This analogy can be applied to the whole economy.

Edited by gnvqsos
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The France thread was rammed with people saying we need to borrow our way out of debt, any of them care to explain why it never worked before?

 

Could you do your gardening with no tools?

 

I reckon that before you started your business you had to 'invest' in equipping yourself to make money; I suspect that's what these people have in mind, pure austerity isn't the solution it's only half the solution - governments needs to invest in the future otherwise they'll end up throwing ever diminishing tax payers money at an unproductive country.

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The France thread was rammed with people saying we need to borrow our way out of debt, any of them care to explain why it never worked before?

 

I haven't seen this France Thread.

I feel that the term "borrow your way out of debt" is both provocative and misleading. If you don't have the money to buy a house to put your family in it is much cheaper in the long run to get a mortgage and buy one, than it is to rent for ever.

 

If you stop people from borrowing money so they can have a normal life, then you finish up with the bulk of the population getting worse off. The exact opposite to what Thatcher advocated.

 

Whereas, if you are a multimilionaire cabinet minister, it is unlikely that you have ever needed to raise a mortgage, so you are out of touch with the way things normally work for the vast majority of really hard working people.

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Deficit is not naturally bad. In an ideal world, the economy would have some surplus during a boom, and dip slightly into deficit during a recession, so the shape of the public finances would naturally peak and trough over an economic cycle.

 

Some surplus from a boom acts as an insurance policy against a slump. The ability to borrow in a slump gives additional backup when we need it.

 

The problem has been that we run up a massive deficit during a boom, leaving us with no insurance policy.

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