Sunday, 17 June 2012

Meanwhile, we're all another day older and deeper in debt

As a change from the issues which have dominated this blog for the last couple of weeks, I'd like to suggest people read this post on the BBC News website about another issue of abiding concern to me -- that of debt and interest charges:

[...] I want to suggest that the biggest challenge facing mature democracies is how to restore the social contract between the generations.

But I recognise that the obstacles to doing so are daunting. Not the least of these is that the young find it quite hard to compute their own long-term economic interests.

It is surprisingly easy to win the support of young voters for policies that would ultimately make matters even worse for them, like maintaining defined benefit pensions for public employees.

If young Americans knew what was good for them, they would all be in the Tea Party.

A second problem is that today's Western democracies now play such a large part in redistributing income that politicians who argue for cutting expenditures nearly always run into the well-organised opposition of one or both of two groups: recipients of public sector pay and recipients of government benefits.

Is there a constitutional solution to this problem? (Read more)
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  1. Let us assume we borrow 100 billion for the next 100 years and pay nothing back and not add to the debt in that time. What is envisaged perhaps?

    The interest at 4% we would owe 4 trillion (4000 million)

    Interest at 7% we would owe nearly 90 trillion!!!! 90,000 million

    Interest at 12% we would owe ....wait for it...

    835 trillion !! £835,000,000,000,000

    Just by borrowing 100 billion


    OK this make no sense to most people so if we borrow £10 for 100 years paid nothing back and did not borrow any more.

    at 4% we would owe £505 !

    at 7% we would owe £8600 !!

    at 12% we would owe £835000 !!!

    Just to borrow £10. No wonder it is condemned by God


  2. Since I was getting into this. If I borrowed £10 on my credit card APR 19.9% for 100 years I would owe £762 million pounds!


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  4. What do all of these struggling economies have in common?

    No kids.. Low birth-rate. Low or zero growth.

    Without growth we have no chance of paying anything off.

    The trouble is who will pay it off, and how?

    For too long we have worshiped our job/bank account and put our faith in pension plans not God.

    We chose money over children and disobeyed God.

    “For although they knew God, they neither glorified him as God nor gave thanks to him, but their thinking became futile and their foolish hearts were darkened. Although they claimed to be wise, they became fools!

    Romans 1, 21 and 22

    You know the next bit....

    I wouldn’t bet on my kids paying your pensions…..

    I wouldn’t bet on immigrants paying your pensions…

    I certainly would not bet on the EU paying your pensions...

    So who is going to pay them?


  5. Dear John,
    A perennial question. Successive Governments have colluded with big business to destroy our manufacturing base and outsource. Whilst once upon a time, helping India, China and other third world countries seemed a good social economic thing to do, we have to ask who has it benefited?
    The poverty in India is still vast, China the same, but these two counties have become the wealthiest in the world and we have become a third rate country economically.
    It is useless the Government trying to hide the effect of our deficit by borrowing at unsustainable levels. The public have been conditioned by the banks to spend, spend, spend. This has created a society of expectation. Even those on benefits have the latest flat screen TV’s. The mantra is, they’ve got one so why can’t I. There is no longer the concept that you can’t have it if you can’t afford it.
    Additionally, since 1945 we have created a have and have not society, but don't worry, we will take from those who work and give to those who won’t. The Government is now at least admitting that they don't know how to tackle the benefits situation and get it back under control.
    Further wasted money goes on over priced military contracts and a grossly inefficient NHS.
    Frankly I think it will take decades to reign in the expenses even if the Government have the guts to do it.

  6. But the government won't have the guts.

    I think the last line on the BBC article is the key one. Everyone blames everyone else. So we blame bankers, but not ourselves for borrowing.

    The problem is that the "right" has rubbed off on us, in the wrong way... wanting more and more. And the "left" has rubbed off on us, that the sort of things that the last comment observed.

    Given that 55% of the work force is some sort of state employee and a significant chunk dependant on the state in some way, apart from the obvious unsustainability (how can the minority pay for the majority), how will the majority vote for their job/benefit be cut?

    Darren Moore