Increasing borrowing to reduce borrowing.

[gnvqsos]

Deficit is not naturally bad. In an ideal world, the economy would have some surplus during a boom, and dip slightly into deficit during a recession, so the shape of the public finances would naturally peak and trough over an economic cycle.

 

Some surplus from a boom acts as an insurance policy against a slump. The ability to borrow in a slump gives additional backup when we need it.

 

The problem has been that we run up a massive deficit during a boom, leaving us with no insurance policy.

 

Thats right and for every deficit there is a corresponding surplus elsewhere-thats the basis of accounting.

[andygardener]

I haven't seen this France Thread.

I feel that the term "borrow your way out of debt" is both provocative and misleading. If you don't have the money to buy a house to put your family in it is much cheaper in the long run to get a mortgage and buy one, than it is to rent for ever.

 

If you stop people from borrowing money so they can have a normal life, then you finish up with the bulk of the population getting worse off. The exact opposite to what Thatcher advocated.

 

Whereas, if you are a multimilionaire cabinet minister, it is unlikely that you have ever needed to raise a mortgage, so you are out of touch with the way things normally work for the vast majority of really hard working people.

 

I've no problem with borrowing. Borrow at a decent rate of interest to buy a house (capital investment moved onto revenue budget) is sensible. However you need to borrow what you can afford to repay, albeit in the case of governments you may never repay it all in totality like we do with our mortgages.

 

What we have been doing is taking out a mortgage which we're entirely paying off on our credit card. Unless you have very patient creditors than either you credit limit gets cut or the rate goes up eventually, then it spirals out of control very quickly. That's what we face if we do not get our house in order, please don't say we are so uniquely super that what is going to happen to half of europe very soon could never possible happen to us.

[andygardener]

Thats right and for every deficit there is a corresponding surplus elsewhere-thats the basis of accounting.

 

How you you think Greeces creditors "surplus" accounts are looking over the last year or so?

[chem1st]

 

A short video of 5 minutes looking at a successful currency launched in the 1930s in Worgl that eliminated 30% unemployment and boosted trade and production. It was subsequently made illegal and the central bank of Austria resumed it's currency monopoly. Unemployment duly rose back up to 30%.

[chem1st]

I've no problem with borrowing. Borrow at a decent rate of interest to buy a house (capital investment moved onto revenue budget) is sensible. However you need to borrow what you can afford to repay, albeit in the case of governments you may never repay it all in totality like we do with our mortgages.

 

What we have been doing is taking out a mortgage which we're entirely paying off on our credit card. Unless you have very patient creditors than either you credit limit gets cut or the rate goes up eventually, then it spirals out of control very quickly. That's what we face if we do not get our house in order, please don't say we are so uniquely super that what is going to happen to half of europe very soon could never possible happen to us.

 

That's where they want you, signed up to a large debt, and paying well over the odds for a roof above your head.

Mortgage = slavery.

 

Lots of the debt and problems are due to the excessive housing debt.

[mj.scuba]

That's where they want you, signed up to a large debt, and paying well over the odds for a roof above your head.

Mortgage = slavery.

 

Lots of the debt and problems are due to the excessive housing debt.

 

I think the house and mortgage and credit card thing was an analogy

[andygardener]

That's where they want you, signed up to a large debt, and paying well over the odds for a roof above your head.

Mortgage = slavery.

 

Lots of the debt and problems are due to the excessive housing debt.

 

If we could not turn this thread into a housing rant when you have many to go at that would be much appreciated.

 

edit: and yes MJ was spot on, it was an anology.

[WeX]

Its very simple.A farmer has had his mortgage repayments increased to the point where he cannot buy seed and fertiliser.The bank allows a repayment holiday ,the farmer buys seed and uses the proceeds of the harvest to repay his debts.Borrowing has enabled the farmer to utilise his resources,increase output and facilitated debt repayment.This analogy can be applied to the whole economy.

 

So what happens to the debt while the farmer is having his payment holiday? I'll tell you, it gets added to the debt he already has meaning his repayments are increased, leaving the farmer with a short term gain but an even bigger problem in the long term. So the following year he has to do the same, and the year after and so on until the bank decides he is no longer a viable concern and takes his farm from him.

[andygardener]

So what happens to the debt while the farmer is having his payment holiday? I'll tell you, it gets added to the debt he already has meaning his repayments are increased, leaving the farmer with a short term gain but an even bigger problem in the long term. So the following year he has to do the same, and the year after and so on until the bank decides he is no longer a viable concern and takes his farm from him.

 

It does seem that a frightening small group of us understand this fairly obvious concept.

[NorthernStar]

So what happens to the debt while the farmer is having his payment holiday? I'll tell you, it gets added to the debt he already has meaning his repayments are increased, leaving the farmer with a short term gain but an even bigger problem in the long term. So the following year he has to do the same, and the year after and so on until the bank decides he is no longer a viable concern and takes his farm from him.

 

But surely it's better the farmer remains productive than saying to himself "well stuff this then, I'll leave my land to itself and do nowt and the bank can do one". If that was the case then the bank and the farmer lose out, with a more balance approach they could both be winners.