Realist, not conformist analysis of the latest financial, business and political news

It’s Amazing What Some People Will Believe – Government Debt Edition

Some people just seem to lack a switch or two in their heads. Those little bits that allow one to think through the implication of one belief or assertion upon another.

This example comes from the Senior Lecturer on the subject of government debt. He tells us this about such debt:

Ten key facts everyone should know before discussing debt issues in the UK:

1. A quarter of UK government debt is owed to the UK government itself

2. Three-quarters of UK government debt is owed to people and institutions in the UK

3. Of G7 economies, only Germany has a lower government debt (as a proportion of GDP) than the UK

OK, those are true. But then we’re also told this:

That second cannot be true because of that first. We’ve been borrowing to invest for a couple of centuries now so therefore there shouldn’t be any debt, should there? We’ve already had that growth which the investment causes, leading to our having repaid the debt.

That is, if debt pays for itself then why is there any debt?

A profound belief in incompatibilities is not the best method of running a country.

Of course, there is the correct answer here. Some forms of borrowing do indeed create the revenues to pay it back, with interest and profit on top. Those are the things we don’t need government to do because they pay back the borrowings with interest and profit on top. There are other forms of investment that don’t meet this test – therefore we shouldn’t be doing them. That is, government investing for profit logically shouldn’t be done.

Government investing for reasons other than profit is an entirely different question.

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4 years ago

Its another version of the Leftist argument that any socialist country that fails wasn’t really socialist in the first place. By definition socialism can’t fail, so anything called socialism that fails can’t be socialism.

So any ‘investment’ that the State makes via debt that doesn’t pay for itself wasn’t the right sort of investment, while the investments that I’m propounding most definitely are……………..

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