Poll: Government Debt

[Mad Maniac with axe-firing chainsaw]

Now, I am going to state right off the bat that I am no economist. I do not know all the magic about how debt works, how the economy is driven, or any of that stuff. But what I want to know is, why do governments borrow so much?

Britains debt is apparently a staggering 100% of GDP, according to one source. Now this to me seems like a tremendous waste of money. Imagine all the money we the tax payer must spend on interest? And we wonder why the West is losing ground. Surely a government with good foresight would want to get all debts off its books so it isn't burdened by the interest payments. Now, this would mean cutting back on public services, but to me, this seems like a necessary evil. You cannot buy something if you cannot afford it. Therefore, if you are already in debt, it is wrong to borrow more, regardless of the situation, as you will just build up more debt and have to pay more interest. If the country needs the money now (for an emergency), then it may be necessary, but otherwise if you need that level of income then it should be raised by taxes and gradually built up, and a buffer should be saved in case a crisis comes up, as China has done. That is my view, I think that all possible efforts need to be sunk into removing this blight upon our finances. We'll be all the stronger for it.

But it occurred to me as I pondered this argument. Maybe I'm not understanding something here. I don't know how the economy works, maybe the system would collapse or something. Is there something that I am not getting, or am I right and is government just being short-sighted and selfish as usual?

 

[grimsprice]

well, the problem is we (meaning EVERY country) has career politicians, not just people who get elected, they learn how to be a politician. the MAJOR problem is our politicians don't have to have a degree in economics to get elected. which i'm guessing would solve all our problems.

 

[Crimsane]

Red numbers are bad? Fuck. QUICK, TELL ZEE PRESIDENT!

 

[Pandalisk]

So the President can buy his super slide, Optimus Prime robots and enough cocaine to keep him mellow.

Theres also secret labs and bases, and of course the pit trap in the prime ministers office at 10 downing street

in ireland Our Taoiseach spent it on Chocolate eclairs, caviar and booze

you see there is some confusion with our leaders, they think the black numbers are bad.
why are the black numbers good and red bad? i call rascism somehow.

 

[Wadders]

Heh, I'm just as confused as you are with all this stuff. Partly because I'm too lazy to find out, and partly because economics bores me to death, despite how important it is to life the universe and everything.

But yeah. It's bad. I know that much. We should start exporting awesome British stuff like fish and chips, hooliganism and Yorkshire Tea.

 

[Mad Maniac with axe-firing chainsaw]

So the President can buy his super slide, Optimus Prime robots and enough cocaine to keep him mellow.

Theres also secret labs and bases, and of course the pit trap in the prime ministers office at 10 downing street

in ireland Our Taoiseach spent it on Chocolate eclairs, caviar and booze

Ah, of course! They spent it all on the pit traps! I should've known. How else do you blow billions of pounds?

Governments do seem to throw money away at times. I mean, look at trident. We don't need new nuclear platforms, the current nukes kill people perfectly effectively. Its like having nukes is a status symbol or something.

 

[Cryo84R]

What? Taking the deficit from 1 trillion to 10 trillion is bad thing?

Better tell congress. I'm pretty sure they think it's the opposite.

 

[Tales of Golden Sun]

Why can't people just lend money WITHOUT wanting to make profit...
It would make life a lot easier, lending without interest.

 

[Mad Maniac with axe-firing chainsaw]

Why can't people just lend money WITHOUT wanting to make profit...
It would make life a lot easier, lending without interest.

The old christian taboo about usury? That might make sense actually, but who would be willing to lend the money?

I think systems like the IMF make sense, save up money and spend it in emergencies, maintaining the pot through good financial practice (investment in projects and the like, or even straight taxation to build up a critical mass of money for use in emergencies.) That would help to stop recessions, fund charitable projects, and just generally keep the gears of humanity churning towards progress.

 

[soladrin]

because its in humans nature

also, i agree that it just seems dumb that countries seem to have more debts then actual properties, i guess the banks own the world in the end XD

 

[wwjdftw]

Why can't people just lend money WITHOUT wanting to make profit...
It would make life a lot easier, lending without interest.

The old christian taboo about usury? That might make sense actually, but who would be willing to lend the money?

i would but i, sadly don't have teh moniez

 

[Scrittore]

Now, this would mean cutting back on public services, but to me, this seems like a necessary evil.

But your career, I assume, doesn't rely on maintaining public services.

 

[Fulax]

Someone is going to have to pay that money back, and that someone is us, the taxpayer.

Its already starting to catch up with us:

Hospitals will be forced to make cuts to pay for a massive rise in the bills for Labour's controversial private finance programme after the next general election.

Whitehall documents seen by The Sunday Telegraph reveal a financial bombshell which will hit the next Government.

The cost of NHS building deals agreed since 1997 will swell by almost one quarter from 2011 to 2014, necessitating billions of pounds in "efficiency savings", which are already being drawn up by trusts.
...
Of a total £60 billion debt owed to the developers, less than £5 billion will have been paid to them by the time of a likely general election next May, the document, disclosed under the Freedom of Information Act, shows

http://www.telegraph.co.uk/health/healthnews/5995025/Hospitals-to-cut-services-to-pay-for-pay-60bn-private-finance-deal.html

 

[LongAndShort]

It depends on where the money is being spent. You could take a Keynesian approach and say that as long as the money is being spent on keeping up employment you'll be fine. employment stimulates spending and spending stimulates growth. It was government spending that pulled the USA out of the great depression, first with the Roosevelt program (i think that's what its called), then with the second world war. Such a line of thought is that government debt is a necessary evil.

 

[LockHeart]

It depends on where the money is being spent. You could take a Keynesian approach and say that as long as the money is being spent on keeping up employment you'll be fine. employment stimulates spending and spending stimulates growth. It was government spending that pulled the USA out of the great depression, first with the Roosevelt program (i think that's what its called), then with the second world war. Such a line of thought is that government debt is a necessary evil.

Well from what I hear there's debate over whether the New Deal actually prolonged the Depression, believe it or not.

I'd just expect the government to organise the nation's finances as I'd organise my own, i.e. don't get into debt, because at some point creditors are going to come along and break your legs when they realise that you're not good for the money.

 

[LongAndShort]

Well from what I hear there's debate over whether the New Deal actually prolonged the Depression, believe it or not.

I'd just expect the government to organise the nation's finances as I'd organise my own, i.e. don't get into debt, because at some point creditors are going to come along and break your legs when they realise that you're not good for the money.

Most of the debate is just Neoclassical propaganda against the only real threat to its dominance of the economic theory. I'm not much of a Keynesian supporter either, but it does fill in a lot of holes and takes into account factors which neoclassicism doesn't. And debts fine as long as we can eventually pay it off. If it takes a while that should be alright, as long as we can pay it off. I don't wanna get my legs broken either.

 

[Mad Maniac with axe-firing chainsaw]

I did some thinking overnight, and these are my current thoughts.

I know how buisiness debt works, at a basic level. You borrow money and invest it in the hope that you will make enough money from your investment to cover the interest payments later. The hope is that you get your profit, the loaning party gets its interest, and everyone leaves rich and happy. However, this only works if the profit is made on the loan.

It is my understanding that the government is using the money to take a share in major banks on the brink of collapse. The idea is that this will keep the banks afloat, and the government will make the money back before it hits the taxpayer. It is a nice idea with underlying buisiness principles, but will it work? This plan requires the banks to start making a profit again.

Thats all I really know. I guess in this case, the governments actions can be justified as this is an economic emergency. However, if the banks still collapse and the money isn't returned, this is going to collapse like a stack of cards.

I heard that RBS has managed to turn things around and make a profit. This is a good sign, signalling that maybe things aren't going to be entirely doom and gloom after all. However, Britain still need to recoup the massive government and buisiness losses and that is going to take time. The unemployment rate is still rising and it will take some time for financing to start trickling down to buisinesses which depend on loans from banks for survival.

I don't know anything about the situation in the US.

We need to look towards the future. A focus has to be on making sure that we pay off our debts and leave borrowing money for emergencies. That way, more money will be around to spend on services, and less spent on interest payments. Keeping a reserve around may be necessary to ward off future crashes. This is how I see the situation, but I may not understand it properly.

 

[Seanchaidh]

The problem is essentially that everyone's a Keynesian during a recession and a neoclassical/neoliberal during a boom. If you deficit spend in a recession (as is practical) and then 'pass the surplus back to taxpayers' during upswings either by tax cuts or spending programs (both of which are politically popular and economically retarded), then you're going to have a debt that increases over time. Spending should be cut and taxes raised during the good times in order to pay down the debt. That's all there is to it. I don't see my view represented in your poll, though.

 

[Liason]

The debt of any nation in the fourth stage of the DTM will undoubtedly be evened out in time. Stage 3 countries as well as stage 2 countries, ex; Peru are still in question and their debt is unstable and unknown if it is capable of being paid off. The imbalance of debt in stage 4 countries such as the U.S. and Britain is a result of several factors, a good chunk of which was loaning to the third world countries, and finding they could not pay them back because of their corrupt governmental leaders.