Saturday, 2 December 2017

Amazing? Yes!

What amazes me is the inability of politicians to think about financial affairs. There is a simple truth. You cannot spend more than you ‘earn’. In government parlance that means you cannot spend more than you get in tax income. If you do, there is only one way to alleviate the shortage, you borrow. In the case of the UK the government(s) have borrowed close to £2trillion. By all accounts the debt stands at some 85% of GDP! All talk of reducing the deficit is just total idiotic and simply means just one thing, we keep on increasing the debt. The deficit talk just underpins the inability to reduce our spending. It also means any government, past, present, future has build up a society that vastly lives beyond its means. Who is to blame? We all are! Simply too many of us are walking along with closed eyes and cotton-wool in our ears. It is worrying to hear on the various news channels the continuing clamour for ever more money. NHS, Social Security. It must be obvious to all except it isn’t, that there will come a time when the whole edifice will just crumble and collapse.
That time will come when the GDP will equal our debt. When it becomes impossible to service the debt without cutting all services to the bone. No matter which government will be in power it will fall.
The following excerpt from 2015 shows the continual rise we see today.
The United Kingdom National Debt is the total quantity of money borrowed by the Government of the UK at any time through the issue of securities.
As of Q1 (the first quarter of) 2015, UK government debt amounted to £1.56 trillion, or 81.58% of total GDP, at which time the annual cost of servicing (paying the interest) the public debt amounted to around £43 billion (which is roughly 3% of GDP or 8% of UK government tax income). Due to the Government's significant budget deficit, the national debt is increasing by approximately £73.5 billion per annum, or around £1.4 billion each week.
So even if we reduce the deficit to zero our debt stays the same, we continue to pay the interest charges which today are close to £50billion annually!!! These facts are continually hidden by politicians who blurb happily about deficits which on the whole do not make a jot of difference to the debt! David Cameron in his days actually said ‘We are making payments to reduce the debt’ when in fact he was just trying to reduce the deficit (the difference between the budget set and the actual expenditure). Obviously an abject failure. Today we are facing the prospect of a UK Labour government who evidently have no idea of the debt we are facing and in fact want to increase it dramatically. This might mean we will have to face up to a 1930’s style economic collapse.

In Wales we have still to face the UK economic problems but worringly the Welsh government also wants borrowing powers. It nevers rains but it pours! No talk of balancing the budgets, no talk of how to divide the available money most advantageously. No, just borrowing like there is no tomorrow. It will all end when nations can no longer finance the debt interest without cutting even more of the services they installed. The one thing we all need to remember is this – THERE IS NO SUCH THING AS A FREE LUNCH (unless you're a politician).

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