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National Debt

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National Debt

Postby Russell » Wed May 31, 2017 8:04 pm

During the 2007 recession I posed the position that we would never be able to repay the national debt. The general feeling on the forum was that we could. Since them the debt has spiralled. http://www.ukpublicspending.co.uk/uk_na ... chart.html

Have people's views changed? If not, at what point, (i.e what debt figure) would you declare that repayment was impossible?
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Re: National Debt

Postby Smouldering Stoat » Wed May 31, 2017 8:52 pm

No, because we continue to be able to meet our repayments as they fall due. The link you have posted shows that the national debt has been at much higher levels historically.

Governments have to borrow money. It's not possible to fund everything out of current revenue. It repays that debt in instalments, much as you might by taking out a mortgage. Not many people could repay the whole of their mortgage in one go: if they could, there'd be no point in taking out the mortgage in the first place. The same applies to the Government. The test isn't whether the Government could repay all the national debt in one go, but whether it can meet the repayments it has to make. As things stand, it can do so easily.

The British Government hasn't defaulted on its debts for centuries, including those times when the national debt was far higher in relative terms than it is now: that's the principal reason why the Government can borrow quite cheaply. British Government debt is a very safe investment.
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Re: National Debt

Postby tph » Wed May 31, 2017 11:01 pm

I think the danger is that although we can still afford to pay the debt if we have a significant decline in government revenue that may not be the case.
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Re: National Debt

Postby Russell » Wed May 31, 2017 11:05 pm

Smouldering Stoat wrote:No, because we continue to be able to meet our repayments as they fall due. The link you have posted shows that the national debt has been at much higher levels historically.

Governments have to borrow money. It's not possible to fund everything out of current revenue. It repays that debt in instalments, much as you might by taking out a mortgage. Not many people could repay the whole of their mortgage in one go: if they could, there'd be no point in taking out the mortgage in the first place. The same applies to the Government. The test isn't whether the Government could repay all the national debt in one go, but whether it can meet the repayments it has to make. As things stand, it can do so easily.

The British Government hasn't defaulted on its debts for centuries, including those times when the national debt was far higher in relative terms than it is now: that's the principal reason why the Government can borrow quite cheaply. British Government debt is a very safe investment.


We have not repaid a penny, we are 'servicing' a growing debt. At what level would you accept we were unable to repay the debt?
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Re: National Debt

Postby Smouldering Stoat » Thu Jun 01, 2017 4:59 am

That's just not true, Alex. The Government repays debt all the time. It's not just meeting the interest payments. As Government securities mature, the Government repays the principal. As the link you posted demonstrates, British Government debt is at a lower level than it has historically sometimes been.

As tph says, the danger doesn't lie in the level of debt, but in a sudden loss of revenue that would leave the Government unable to meet its commitments. There's no real sign of that happening, and to an extent the Government is able to increase its own income by raising taxes. We're also fortunate that we issue debt denominated in our own currency.
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Re: National Debt

Postby Russell » Thu Jun 01, 2017 9:10 am

SS you owe £100, you make a real terms repayment your debt becomes £99 or lower. Debt has trebled since the last time I raised the topic here, we might have repaid 1 debt, to make it 3 times worse with new debts. But overall, by no stretch of the imagination could it ever be concluded we are repaying anything at all.
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Re: National Debt

Postby Smouldering Stoat » Thu Jun 01, 2017 9:55 am

Debt has fallen from its high point in real terms. We were hugely indebted after both World Wars. We continue to repay debt as it falls due.

Public debt is private wealth. Government securities are a safe investment and form a major part of the assets of pension funds, among other institutions.
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Re: National Debt

Postby Russell » Thu Jun 01, 2017 10:56 am

You're going off on tangents, yes we are servicing the debt, we not paying anything back. Back to the original question, at what debt level (monetary value) would you conclude we were no longer able to repay the debt?
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Re: National Debt

Postby Smouldering Stoat » Thu Jun 01, 2017 11:45 am

We are paying debt back. If we couldn't repay our debts, people would stop lending to us, certainly at the incredibly cheap rates that they currently do. Borrowing at the current rate is quite sustainable.

It is not possible to answer your question in the way you have posed it. Sustainability of public borrowing depends upon many more variables than just the gross amount of debt.
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Re: National Debt

Postby Russell » Thu Jun 01, 2017 12:06 pm

SS you are confusing servicing the debt with repaying the debt.

If you have £100 of debt and that debt increases to £300. You have not repaid anything. This is a cast iron fact, its not open to dispute or interpretation.

To repay any debt the government would likely have to run a surplus.
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