Macroeconomics, the economy, inflation etc. *likely to be very dull*
Comments
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Fair enough but imagine if going into next fiscal you did not have £100bn of debt servicing costs?rjsterry said:
I don't see why debt servicing costs is seen as some sort of completely different category of spending. It is just spending on the things we bought last year, the year before, etc. spread over a number of years rather than the spending on things bought this year. Yes, there is a marginal additional cost to spreading that spending, but it's still fundamentally paying for stuff.surrey_commuter said:
I think you are ignoring the term of the debt. Yes you may sell a 10 year bond at 0.5% but that will get rolled over at the prevailing market rate. This is why it is argued that they should be doing their affordability tests at 4%.rick_chasey said:
Like I said, the issue is not the size of the debt per se, it's the quality of the governance and the broader economic situation.surrey_commuter said:
so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.
The way you say it, the tail (the debt) is wagging the economy ( the dog). I'm not saying that fiscal incontinence is the answer, i'm saying worrying about the absolute size of the debt is not right, and I'm saying you respond to the borrowing environments of the moment i.e. borrow when rates are low and don't when rates are high.
Instead, we have a situation where the gov't did austerity when rates were low and they're now borrowing like mad when rates are high to give....bankers bigger bonuses and tax breaks for the richest 630,000?
When i said back in the low interest dates when it was effectively negative, the market was telling the govt to go spend.
Now rates are rising sharply, the market is telling the govt to stop spending.
This gov't is doing the reverse.
Debt servicing costs are the second biggest item of Govt expenditure and is bumping up towards 10%.
I think we are in the death spiral
You could stick within Rick's flippy floppy rules and still have £60bn extra for the NHS or other pet projects0 -
Charles “Charlie” Munger, a longtime resident of Pasadena, California, is perhaps best known as the Vice Chairman of the world’s greatest compound interest machine: Berkshire Hathaway, Inc.
https://www.youtube.com/watch?v=v5UCmsXpngA
Munger and Warren have been there and seen it all.
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'Imagine if I hadn't paid any interest on my mortgage' - you wouldn't have a house.surrey_commuter said:
Fair enough but imagine if going into next fiscal you did not have £100bn of debt servicing costs?rjsterry said:
I don't see why debt servicing costs is seen as some sort of completely different category of spending. It is just spending on the things we bought last year, the year before, etc. spread over a number of years rather than the spending on things bought this year. Yes, there is a marginal additional cost to spreading that spending, but it's still fundamentally paying for stuff.surrey_commuter said:
I think you are ignoring the term of the debt. Yes you may sell a 10 year bond at 0.5% but that will get rolled over at the prevailing market rate. This is why it is argued that they should be doing their affordability tests at 4%.rick_chasey said:
Like I said, the issue is not the size of the debt per se, it's the quality of the governance and the broader economic situation.surrey_commuter said:
so we cross our fingers and hope for growth above 5%?rick_chasey said:
So that is covered in the article, specifically. I don't need to repeat that.surrey_commuter said:
you can't just ignore your previous arguments or it becomes pointless ad I will give up in frustration.rick_chasey said:He's making the point that it's not the absolute debt level that is an issue (and so austerity is unnecessary - that's a big disagreement we've had) as is worrying about certain types of common rich world inflation inflation (as the causes s are things that you can't control without big pain).
He's not arguing that bad governance is fine. Nor is he saying that fiscal incontinence is fine either. But that, in and of itself, the debt level isn't inherently a problem. It only becomes a problem with bad governance.
The basis for the debt level not being inherently bad was that debt servicing costs were more important and they were (conveniently) very low.
The common argument on here was that with that debt stretching into the never never it was inevitable that one day interest rate would return to their historic norms and at that point debt servicing costs would spiral out of control.
I see no way that the annual deficit will fall below £100bn for the forseeable future and that come the next crisis we will have no head room
And head room is entirely defined by growth.
The way you say it, the tail (the debt) is wagging the economy ( the dog). I'm not saying that fiscal incontinence is the answer, i'm saying worrying about the absolute size of the debt is not right, and I'm saying you respond to the borrowing environments of the moment i.e. borrow when rates are low and don't when rates are high.
Instead, we have a situation where the gov't did austerity when rates were low and they're now borrowing like mad when rates are high to give....bankers bigger bonuses and tax breaks for the richest 630,000?
When i said back in the low interest dates when it was effectively negative, the market was telling the govt to go spend.
Now rates are rising sharply, the market is telling the govt to stop spending.
This gov't is doing the reverse.
Debt servicing costs are the second biggest item of Govt expenditure and is bumping up towards 10%.
I think we are in the death spiral
You could stick within Rick's flippy floppy rules and still have £60bn extra for the NHS or other pet projects
If we hadn't borrowed the money in the first place, far more money would need to be put in now to catch up.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
My rules aren’t flip floppy. I said it quite often: if rates are really low, borrow. When rates are high, don’t.
This govt is doing the opposite.
Austerity when the market was begging them to borrow.
Borrowing to fund tax cuts to the rich when the market wants them to reign it in0 -
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Rubbish, you're assumptions relied on the fallacy of near zero percent interest rates. Debt mounts up, it can't just be paid off in an instant, you don't what's around the corner (Financial Crisis, Brexit, Covid, Putin/Infation...)rick_chasey said:My rules aren’t flip floppy. I said it quite often: if rates are really low, borrow. When rates are high, don’t.
This govt is doing the opposite.
Austerity when the market was begging them to borrow.
Borrowing to fund tax cuts to the rich when the market wants them to reign it in
Casino Economic Policy is what you believed in!0 -
If you bought 10 year gilts at 0.25%, what’s the problem?
The issue now is the govt is embarking on a huge amount of borrowing now, when rates are high.1 -
Rates might be -3% now which would make the 0.25 % borrowing look expensive.rick_chasey said:If you bought 10 year gilts at 0.25%, what’s the problem?
The issue now is the govt is embarking on a huge amount of borrowing now, when rates are high.
The issue isn't the rate of borrowing, but whether it is less than the returns.0 -
Fair. But then focus would post his chart…TheBigBean said:
Rates might be -3% now which would make the 0.25 % borrowing look expensive.rick_chasey said:If you bought 10 year gilts at 0.25%, what’s the problem?
The issue now is the govt is embarking on a huge amount of borrowing now, when rates are high.
The issue isn't the rate of borrowing, but whether it is less than the returns.
With higher rates you need higher returns.
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Economist making the same point Ed was earlier.
Not looking forward to 5% rates0 -
Really not sure about that calculation.0
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I am starting to wonder if you understand that they can’t pay it off because rates have started rising.rick_chasey said:My rules aren’t flip floppy. I said it quite often: if rates are really low, borrow. When rates are high, don’t.
This govt is doing the opposite.
Austerity when the market was begging them to borrow.
Borrowing to fund tax cuts to the rich when the market wants them to reign it in0 -
Dorset_Boy said:
Really not sure about that calculation.
It does seem dubious. I am sure there is a good reason why they are not choosing to compare with the early nineties when MIRAS was diluted and 14% interest rates crashed the property market.Dorset_Boy said:Really not sure about that calculation.
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Yes, when Bradley Stoke was re-christened Sadly Broke as c75% of property owners there had negative equity.
Or even 1988/89 when mortgage rates went from 9% to 17% in a year.0 -
It’s a) the lack of a tax break and b) if the houses are 5x higher in value (in real terms) then it stands to reason that on average mortgage holders are 5x as sensitive to changes?Dorset_Boy said:Yes, when Bradley Stoke was re-christened Sadly Broke as c75% of property owners there had negative equity.
Or even 1988/89 when mortgage rates went from 9% to 17% in a year.
And anyway, it’s early days. It’s all apocalyptic forecasts. It’s not even October yet.0 -
Is everybody still happy with our debt levels?0
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Still wish we had more of it at 50 year fixed.surrey_commuter said:Is everybody still happy with our debt levels?
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With this lot, no.surrey_commuter said:Is everybody still happy with our debt levels?
If you'll pardon the analogy. You might lend to an established and soberly run organisation with a strong track record but not a new start-up whose request for a loan states that their plan is to take the money straight down to the bookmaker to put it on a horse.1985 Mercian King of Mercia - work in progress (Hah! Who am I kidding?)
Pinnacle Monzonite
Part of the anti-growth coalition0 -
rjsterry said:
With this lot, no.surrey_commuter said:Is everybody still happy with our debt levels?
If you'll pardon the analogy. You might lend to an established and soberly run organisation with a strong track record but not a new start-up whose request for a loan states that their plan is to take the money straight down to the bookmaker to put it on a horse.
Any chance you could tie that in with an analogy about buying ten pints of beer?0 -
They've borrowed the money to buy some guys down the pub 10 pints.briantrumpet said:rjsterry said:
With this lot, no.surrey_commuter said:Is everybody still happy with our debt levels?
If you'll pardon the analogy. You might lend to an established and soberly run organisation with a strong track record but not a new start-up whose request for a loan states that their plan is to take the money straight down to the bookmaker to put it on a horse.
Any chance you could tie that in with an analogy about buying ten pints of beer?
They've given it to mates instead. Guys down the pub are unhappy and may seek reprisals. Lenders not best pleased either.The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.0 -
pblakeney said:
They've borrowed the money to buy some guys down the pub 10 pints.briantrumpet said:rjsterry said:
With this lot, no.surrey_commuter said:Is everybody still happy with our debt levels?
If you'll pardon the analogy. You might lend to an established and soberly run organisation with a strong track record but not a new start-up whose request for a loan states that their plan is to take the money straight down to the bookmaker to put it on a horse.
Any chance you could tie that in with an analogy about buying ten pints of beer?
They've given it to mates instead. Guys down the pub are unhappy and may seek reprisals. Lenders not best pleased either.
That might be better than its use for explaining tax.0 -
Ah, you forgot to mention that the beer that the mates buy will help the poor... possibly... somehow... eventually... but it will be trickling down somewhere. For sure.0
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Trickle down you say....
The above may be fact, or fiction, I may be serious, I may be jesting.
I am not sure. You have no chance.Veronese68 wrote:PB is the most sensible person on here.1 -
The rich guy has started paying to go to a private members' club, so doesn't see why he should carry on paying for the beer of the others. I think this is because buying beer isn't like taxes.0
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Now we're getting somewhere. And they can have their private club nice and warm, while the pub filled with common people can't afford the heating bill, so can everyone wear warm clothes. At least the beer will be cold too.0
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not many people want to tie much money up for that longkingstongraham said:
Still wish we had more of it at 50 year fixed.surrey_commuter said:Is everybody still happy with our debt levels?
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a fine analogy, the problem is that the £2trn was lent to the sober guy but now his unruly grandchildren need to refinance.rjsterry said:
With this lot, no.surrey_commuter said:Is everybody still happy with our debt levels?
If you'll pardon the analogy. You might lend to an established and soberly run organisation with a strong track record but not a new start-up whose request for a loan states that their plan is to take the money straight down to the bookmaker to put it on a horse.
If I remember rightly it will be fine becuase we have a sovereign currency and we only borrowed for investment and it would have been mad not to.0 -
Nothing to do with existing debt levels, everything to do with the incoming, unfunded, spend.surrey_commuter said:Is everybody still happy with our debt levels?
The issue is the borrowing now, not the borrowing then. You do get that, right?surrey_commuter said:
a fine analogy, the problem is that the £2trn was lent to the sober guy but now his unruly grandchildren need to refinance.rjsterry said:
With this lot, no.surrey_commuter said:Is everybody still happy with our debt levels?
If you'll pardon the analogy. You might lend to an established and soberly run organisation with a strong track record but not a new start-up whose request for a loan states that their plan is to take the money straight down to the bookmaker to put it on a horse.
If I remember rightly it will be fine becuase we have a sovereign currency and we only borrowed for investment and it would have been mad not to.0 -
When they sold these, there was demand for more than was offered.surrey_commuter said:
not many people want to tie much money up for that longkingstongraham said:
Still wish we had more of it at 50 year fixed.surrey_commuter said:Is everybody still happy with our debt levels?
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