The Budget

The problem is that those who do believe the macro economic theories are making such a mess of running the country.
Or do you think that successive governments have achieved a great success in the lowest Sterling exchange rate in history.

Sorry Katie59. This is absolute nonsense. I'm fed up with trying to disabuse you of such gobbledygook because you keep repeating the same stuff. I'll leave you to it, but you might find it useful at some stage to get a respected book on macro-economics.

Too much borrowing will cause Sterling to weaken it doesn’t matter wether is QE or selling to the market.

Katie, could you please explain, preferably in words on one syllable, why 'sterling will weaken'.

The problem with QE is that many see it a not having to be repaid, they don’t realize it is included in the National Debt.

Also, who are 'they'? And why are you mangling the meaning of the word 'debt'? A debt is something owed to someone. QE is created money, not borrowed. It is not debt and doesn't have to be repaid to anyone. Why are you so desperate to make it into a debt?

The only 'debt' element of the deficit is the the money invested in government bonds and government savings instruments. People and institutions 'lending' money to the government, as they have done for centuries for the very good reason that it has been a safe and reliable place to put their money and generates and income from interest paid on the investments. It would be utterly ridiculous for the government to redeem all this. The money would just go elsewhere.

The fact is that the UK never has a surplus to repay any debt, when a loan ends another is taken out to replace it

So what are you worrying about? It's been like this for centuries...

the aim is to give our economy a boost and increase growth,

The only way this is going to happen is for the government to put a great deal of money into the economy. £billions are needed to improve every aspect of our public services and every penny spent on this will benefit private enterprises, large or small, because the government makes just about nothing in the way of resources for any public service it finances. With international trade rapidly diminishing as a result of Brexit, and very little foreign direct investment; as far as I can see, a key source of revenue for UK enterprise is going to be its home market.

Same for us Dinahmo in 2004. But I think you’ll find when buying property (or land?) the banks use the ‘commercial rate’ (the exchange rate of which was €1.49 at the time for us too) rather than the tourist rate, which that day was €1.32.

growstuff

Katie59

Urmstongran

‘Project fear’ said the pound would tank.

At present it’s trading 1.17€ which is great for our summer holidays and ex-pats we know in Spain are delighted as their pension money, in sterling then converted to euros, is superb! Before Brexit there were doomsayers on here (I remember one in particular) who was forecasting hordes of ex-pats would be selling up and returning to these shores!

The fear that kept Sterling very low was that of “no deal”
In the end there was a deal so Sterling value is slowly recovering. I hope it does get to pre 2016 levels and above, my expectations are mid £1.20s by the summer which will be nice

But you've just been going on about devaluation of sterling caused by QE.

Growstuff
Too much borrowing will cause Sterling to weaken it doesn’t matter wether is QE or selling to the market. The problem with QE is that many see it a not having to be repaid, they don’t realize it is included in the National Debt.
The fact is that the UK never has a surplus to repay any debt, when a loan ends another is taken out to replace it.

Brexit is a fact of life, the aim is to give our economy a boost and increase growth, do not expect it to produce a surplus so that any debt can actually be reduced.

Katie59

Urmstongran

‘Project fear’ said the pound would tank.

At present it’s trading 1.17€ which is great for our summer holidays and ex-pats we know in Spain are delighted as their pension money, in sterling then converted to euros, is superb! Before Brexit there were doomsayers on here (I remember one in particular) who was forecasting hordes of ex-pats would be selling up and returning to these shores!

The fear that kept Sterling very low was that of “no deal”
In the end there was a deal so Sterling value is slowly recovering. I hope it does get to pre 2016 levels and above, my expectations are mid £1.20s by the summer which will be nice

But you've just been going on about devaluation of sterling caused by QE.

Meanwhile, disaster capitalists have made a killing from fluctuations in the pound and will continue to do so as they pick up failing businesses on the cheap and asset-strip them.

Project fear’ said the pound would tank.

It did tank, right after the referendum. It was only the prompt action of the BoE which injected some £60billion of quantitative easing which stopped it going further.

It's taken 5 years to get back up to where it is now and I suspect that it's only there because current conditions are unprecedented and the markets are feeling their way through.

It has plenty of chance to tank in the future with businesses going bust as a result of Brexit and covid. There's not much to replace them so there will be high unemployment and not a lot of jobs around. Especially if Sunak comes in hard with austerity, as he's given every indication that he will do.

Urmstongran

‘Project fear’ said the pound would tank.

At present it’s trading 1.17€ which is great for our summer holidays and ex-pats we know in Spain are delighted as their pension money, in sterling then converted to euros, is superb! Before Brexit there were doomsayers on here (I remember one in particular) who was forecasting hordes of ex-pats would be selling up and returning to these shores!

The fear that kept Sterling very low was that of “no deal”
In the end there was a deal so Sterling value is slowly recovering. I hope it does get to pre 2016 levels and above, my expectations are mid £1.20s by the summer which will be nice

growstuff

Katie59 Would you mind explaining how you think concepts such as "growth" and "national debt" are connected? How do you think they actually affect the person in the street?

I really don't think you understand what you mean by your last sentence "interest rates are low so financing debt in the normal way doesn’t cost much," No, it doesn't cost much - that's precisely why borrowing money (or creating it) is a good thing to do in the current climate. Interest rates are controlled by the Bank of England and are not likely to rise in the foreseeable future.

I didn’t say borrowing was bad, in a recession or emergency it is entirely justified, it’s the long term use of QE that is damaging.
Without growth it is very difficult for any government to finance the nations needs without borrowing
I’m sure there is just as much “poverty” in Japan as the UK, wether they define it in the same way I have no idea

It's no where near as good as it was 12 years ago. When we bought our land and paid the advance to the builder it was 1.49 euros to £1.

‘Project fear’ said the pound would tank.

At present it’s trading 1.17€ which is great for our summer holidays and ex-pats we know in Spain are delighted as their pension money, in sterling then converted to euros, is superb! Before Brexit there were doomsayers on here (I remember one in particular) who was forecasting hordes of ex-pats would be selling up and returning to these shores!

Katie59 Would you mind explaining how you think concepts such as "growth" and "national debt" are connected? How do you think they actually affect the person in the street?

I really don't think you understand what you mean by your last sentence "interest rates are low so financing debt in the normal way doesn’t cost much," No, it doesn't cost much - that's precisely why borrowing money (or creating it) is a good thing to do in the current climate. Interest rates are controlled by the Bank of England and are not likely to rise in the foreseeable future.

Katie59 Have you read anywhere that the majority of Japanese people are living in poverty as a result of the national debt? I haven't.

I don't understand your comment about the nation owning the debt. Of course it does! Who else do you think "owns" debt? Anybody "owning" debt actually "owns" an asset.

What a pity warnings were labelled "project fear"

www.bbc.co.uk/news/amp/business-56370690

Coincidentally Maisie mentioned Japan , they have no inflation, they also have no growth and their debt is over 200% of GDP their economy is in a mess. They have been using QE for many years to try to get the economy moving, to the extent that most of the government debt is owned by the nation.

We are using QE in the same way that is why some are concerned at the short term free finance continuing, it’s not just Covid most of it was built up beforehand, maybe we should take notice, our growth is better than Japan but not much. So our national debt will continue to rise, I would be surprised if any growth is attained in the next 3 yrs, compared to 2019.

I really don’t buy the concept that QE is free money in any way, interest rates are low so financing debt in the normal way doesn’t cost much,

MaizieD

I think she was being sarcastic, growstuff.

Oh! My mistake then and I apologise. The rest of the post is misinformed though.

A government (in fact, anyone) can have a debt as big as you like. What matters is the cost of servicing the debt ie interest rates. It matters to an ordinary person if interest rates increase sharply, but less so to a sovereign currency issuing country such as the UK, which really issue as much currency as it wants.

The pound (exchange rate) has been hit badly by Brexit, but the current round of QE hasn't made that much difference. People still invest in the UK because it's relatively stable politically. There are also assets to be scooped up at low prices because the economy is in a pickle.

Discouraging imports isn't a bad thing, although it will affect the cost of living if people can't rely on importing from countries where costs are lower.

Government debt is not necessarily a bad thing because the other side of the balance is private wealth, which can be invested - hopefully wisely if the government provides the incentives. Inflation isn't that bad either. 2% is considered to be about the optimum. It reduces debt and encourages spending if people think that prices will rise. Spending is a catalyst for production and employment, although again the government needs to encourage wise spending, not hoarding or speculating, especially not on property.

I think she was being sarcastic, growstuff.

Katie59 Sorry to say you seem a tad confused.

Katie59

OK the Office of National Statistics is a government body.
So of course it’s not reliable!.

It's actually a non-ministerial department aka a quango. Why wouldn't it be reliable? It collects and publishes statistics. It doesn't make any decision as to what should be done with those statistics.

By the way, Japan has a deficit running at more that 200% of GDP. They have no inflation.

Katie59

Any national bank can go bankrupt if it provides the politicians with more money than the country is worth, the currency gets devalued and the national asset value spirals down with it.

The national debt remains (fact) until it is either repaid or inflation diminishes it, the debt from WW2 persisted for many decades. The asset value of the UK is around 5 or 6 times borrowings, along as the BoE keeps control of the economy there won’t be a problem, we do need a long period of political stability now to recover from recent setbacks.

The ONS is not an economic theory nor an explanation. It just publishes numbers.

Some of us are interested in what lies behind this quoted post and your subsequent denial of the fact that the government can 'owe itself' money that doesn't have to be repaid.

OK the Office of National Statistics is a government body.
So of course it’s not reliable!.

It is still all "What Katie Thinks". Could we please have some reliable references?