What caused the UK to be in so much debt?

[mjw47]

Britain isn't in that much debt, and if anything the deficit is certainly not the problem. It can be problematic in the long term, but there's absolutely no reason why the government should do austerity in the middle of a recession.

 

We owe over £1 Trillion and the debt is rising by over £5,000 per second.

 

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&uact=8&ved=0CDAQFjAD&url=http%3A%2F%2Fwww.nationaldebtclock.co.uk%2F&ei=lqFEVZi9FsvnaP3bgZgI&usg=AFQjCNFF5lCD9JNws2V6MyY47InfEuxQew&bvm=bv.92291466,d.d2s

 

Would you care to tell us at what point you consider we will actually be in 'much debt'?

[Anna B]

They called it expansionary austerity. It didn't work and it was only after Osborne relaxed than pace of it that the economy began to pick up.

 

Idiocy

 

---------- Post added 02-05-2015 at 10:43 ----------

 

 

The banks knew it was going to happen.

 

Imagine being able to go down the bookies every Saturday and bet thousands of pounds safe in the knowledge that you get to keep all the winning but if you lose somebody else will make good your losses!

 

The banks always knew that governments would step in to sort it all out. It's why the banks behaviour has changed little and next time they know we all have to bail them out again.

 

And the lesson hasn't been learnt. The banks are overheating again.

[loraward]

And the lesson hasn't been learnt. The banks are overheating again.

 

Without the banks the economy wouldn't grow, business couldn't expand, people couldn't buy homes and much of the other stuff they buy with borrowed money. Whats is the alternative?

[mjw47]

And the lesson hasn't been learnt. The banks are overheating again.

 

Why wouldn't they? Where's the deterrent? Normal business rules don't apply to them as was proved last time round.

 

Unless there is a personal penalty to be payed for failure, gambling with other peoples money must be a fairly carefree activity.

 

And don't forget the bonus's, which they appear to receive whether they win or lose.

[I1L2T3]

Without the banks the economy wouldn't grow, business couldn't expand, people couldn't buy homes and much of the other stuff they buy with borrowed money. Whats is the alternative?

 

Nobody is saying we don't need banks but rather that the banks need to operate differently. In a nutshell the financial sector should be there to oil the wheels of the economy but it should not be a dominant sector in the economy.

 

Banks performing a certain level of speculative investment activity is fine. That helps deliver funds for capital projects to be progressed and for businesses to start up and grow. It also helps deliver growth for pension funds so that people can safely plan for retirement.

 

Where it has gone wrong is that the banks have become a self-serving sector that sucks money out of the economy, a vehicle for mal-investment, eventually near crashed the economy causing us to lose 6 years of economic growth and caused the national debt to almost treble because of the cost of lost output and bailouts. Nobody can defend what they did yet people still try to.

[psynuk]

They called it expansionary austerity. It didn't work and it was only after Osborne relaxed than pace of it that the economy began to pick up.

 

Idiocy

 

---------- Post added 02-05-2015 at 10:43 ----------

 

 

The banks knew it was going to happen.

 

Imagine being able to go down the bookies every Saturday and bet thousands of pounds safe in the knowledge that you get to keep all the winning but if you lose somebody else will make good your losses!

 

The banks always knew that governments would step in to sort it all out. It's why the banks behaviour has changed little and next time they know we all have to bail them out again.

 

I'm not so sure that in the main the banks were aware, inasmuch as the vast majority of banks/financial institutions took a massive hit, some gone for ever.

 

Unless you look at it like the top banking players shaking the tree until those lower down fell.

Was it a premeditated decision to create the CDO products with the long term idea of essentially, the forfeiting customers causing a crash upon industry realisation that these debts were junk and that the governments would step in and pick up the slack?

 

Because that's one hell of a long timeline to be manipulating a whole host of countries fiscal policies, and market directions etc. That kind of long con would include as far back as the right to buy.

 

I don't think that was really the case, I think there was just no real foresight or care or consideration for what the consequences would be if or when the cookie crumbled.

 

" large systemic institutions were able to raise debt on more favourable terms than smaller ones reflecting the perception – which turned out to be generally true– that investors in these institutions were protected by an implicit government guarantee. Indeed, credit rating agencies specifically identified a ‘public support uplift’ in their ratings. " .Jon Cunliffe.

 

Having the -correct- belief that your country would bail you out didn't help leaman bros. The fact that they are the only really big casualty was because (reasons unknown- investment/non deposit status?) it was allowed to fail, it shouldn't have been allowed to in hindsight. But it also shouldn't have been allowed to be in the position where it's failure would have the effect it did.

[I1L2T3]

I'm not so sure that in the main the banks were aware, inasmuch as the vast majority of banks/financial institutions took a massive hit, some gone for ever.

 

Unless you look at it like the top banking players shaking the tree until those lower down fell.

Was it a premeditated decision to create the CDO products with the long term idea of essentially, the forfeiting customers causing a crash upon industry realisation that these debts were junk and that the governments would step in and pick up the slack?

 

Because that's one hell of a long timeline to be manipulating a whole host of countries fiscal policies, and market directions etc. That kind of long con would include as far back as the right to buy.

 

I don't think that was really the case, I think there was just no real foresight or care or consideration for what the consequences would be if or when the cookie crumbled.

 

" large systemic institutions were able to raise debt on more favourable terms than smaller ones reflecting the perception – which turned out to be generally true– that investors in these institutions were protected by an implicit government guarantee. Indeed, credit rating agencies specifically identified a ‘public support uplift’ in their ratings. " .Jon Cunliffe.

 

Having the -correct- belief that your country would bail you out didn't help leaman bros. The fact that they are the only really big casualty was because (reasons unknown- investment/non deposit status?) it was allowed to fail, it shouldn't have been allowed to in hindsight. But it also shouldn't have been allowed to be in the position where it's failure would have the effect it did.

 

The number of banking casualties was remarkably small, just a couple of banks let to go as a kind of sacrifice. The public had to see one or two banks go - it took the heat off the others.

[loraward]

Nobody is saying we don't need banks but rather that the banks need to operate differently. In a nutshell the financial sector should be there to oil the wheels of the economy but it should not be a dominant sector in the economy.

 

Banks performing a certain level of speculative investment activity is fine. That helps deliver funds for capital projects to be progressed and for businesses to start up and grow. It also helps deliver growth for pension funds so that people can safely plan for retirement.

 

Where it has gone wrong is that the banks have become a self-serving sector that sucks money out of the economy, a vehicle for mal-investment, eventually near crashed the economy causing us to lose 6 years of economic growth and caused the national debt to almost treble because of the cost of lost output and bailouts. Nobody can defend what they did yet people still try to.

 

Banks have always been self serving and I have no idea why you think they suck money out of the economy when every penny in the economy exists because banks created it by expanding debt.

[Happ Hazzard]

Maybe the government should base their spending on the amount of money they have coming in, instead of spending willy nilly and then blaming people for not paying enough tax?

[ElasticMan]

The Tories inherited an outrageous budget deficit - they are trying to sort out that deficit so they can begin to pay off the debt. Trouble is they need to be elected, and the lefties pretend that we don't need to sort out the financial mess. They pretend we don't need austerity and gullible people believe them.

 

The deficit was down to the effect of the banking crisis, not over spending.

The Tories were even committed to spending the exact same amounts.