....and there was me thinking this country was broke....

[alttab]

We'll just have to agree to disagree. You think that money comes from unicorns and fairy dust and debt isn't really a problem, and I think that spending more than you tax leads to economic ruin. Apparently the evidence of failed socialist states around the world isn't enough, so we'll just have to watch the Eurozone go under and see whether you're convinced then.

 

spending more than you receive in revenue (running a deficit) is the only way to ensure people can save money. that's not the stuff of fairy stories it's one of the peculiarities of national accounting. running a surplus or balanced budget is actually the path to economic ruin. Don't take my word for it, past recessions in the UK and US were preceded by periods where deficits were too small as government sought to pursue policies of balanced budgets. In other words governments got into trouble when they tried to act how a prudent household might.

[Flatpackhamster]

spending more than you receive in revenue (running a deficit) is the only way to ensure people can save money. that's not the stuff of fairy stories it's one of the peculiarities of national accounting. running a surplus or balanced budget is actually the path to economic ruin. Don't take my word for it, past recessions in the UK and US were preceded by periods where deficits were too small as government sought to pursue policies of balanced budgets. In other words governments got into trouble when they tried to act how a prudent household might.

 

Okay, you know when you're in a pub and you've had a couple of drinks and you're talking to someone you've never met before? And after about 20 minutes they start telling you about the Templars and they stare at your left ear as they explain how the illuminati run everything?

 

That's the point we've reached here.

 

Still, give Angela Merkel a call. I'm sure she'd be interested to learn that Germany is an economic ruin after 20 years of budget surplus.

[localzuk]

spending more than you receive in revenue (running a deficit) is the only way to ensure people can save money. that's not the stuff of fairy stories it's one of the peculiarities of national accounting. running a surplus or balanced budget is actually the path to economic ruin. Don't take my word for it, past recessions in the UK and US were preceded by periods where deficits were too small as government sought to pursue policies of balanced budgets. In other words governments got into trouble when they tried to act how a prudent household might.

 

I think that needs some serious elaboration as at the moment it reads like the fevered dreams of a socialist. Evidence that I can see shows the worst economic periods in history were all preceded by out of control spending!

[alttab]

I think that needs some serious elaboration as at the moment it reads like the fevered dreams of a socialist. Evidence that I can see shows the worst economic periods in history were all preceded by out of control spending!

 

out of control spending by who ? It is prolly true that households loaded up on credit during an era of low rates, economic growth and a housing boom...But prior to this private sector credit boom, the clinton administration in the US sought to balance their budget.

 

So it wasn't the US government that went on an out of control spending boom. it balanced the books.

 

Here in the UK, the deficit during Brown's years as chancellor were modest, and low by historical standards. By 2004 if there was any 'out of control' spend by the blair administration spending it was well and truly done and dusted, as 'efficiencies' and outsourcing to save dough across government took over. Prior to that the conservative government of the 90's sought to reduce the deficit after the deficit HAD to increase as a result of the recession of the late 80's early 90's.

 

So the real boom and bust cycle of the the last 30 or so years in both the US and UK has been one where economic growth is spurted by private sector borrowing. Whether it's corporates expanding into new markets or households buying new cars and houses. This allows the governments to run smaller deficits because the economy is still growing, but then you hit a financial shock which chiefly impacts on those who've borrowed to fuel the growth. In the late 80's/early 90's exiting from the ERM saw rates spike which hurt those who'd borrowed, as a result government runs a bigger deficit as it's welfare payments increase to support the new unemployed, for years afterward increased deficits support a modest recovery.

 

The cycle repeats itself when the large deficits are trimmed over a parliament by a government determined to demonstrate it's financial 'prudence'.

Mark my words, the coalition will never get the deficit down to where they want it, because the appetite just isn't there for the kind of credit fuelled boom which would allow them to reduce the deficit and not plunge us into a depression. To get growth one side of the scale has to go into debt. Goverment sector AND the private sector cannot save at the same time.

 

i'm not a socialist in any way shape or form. I was one of those all too keen to blame the blair-brown goverments for what i would of called overspending, before i put their administration into historical context. They weren't the first goverment to have benefited from a housing boom. It's just that they took over at a particular point in the cycle where private credit expansion meant they didn't have to do very much to get decent growth. Just as the thatcher goverment for a time basked in the glow of private sector credit expansion.

[alttab]

 

Still, give Angela Merkel a call. I'm sure she'd be interested to learn that Germany is an economic ruin after 20 years of budget surplus.

 

which is fine if you've got an export-centric economic model. and you can setup a monetary union which has smaller nations in the union dancing to the tune of your economic model. But neither the UK nor the US have that (and it's debatable as to whether that would be healthy), so budget surpluses aren't an option.