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Author Topic: The good morning, good night thread  (Read 588894 times)
PaulH
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« Reply #1560 on: February 26, 2010, 06:02:18 PM »

Basically it seems that the government has borrowed massively to fund expansion in non-profit making areas (think local government, NHS, education etc) and at the same time made the UK less attractive to outside investment. So less money is coming in, more money is being spent that will never show up again and borrowing goes up. Because of the rate at which money has been pumped in, the borrowing has gone out of control.

I read somewhere that Standard and Poors (who rate economies) had downgraded the UK's credit rating - this makes it harder to borrow money in the first place and increases the level of interest that has to be paid as we're seen as a greater risk. I honestly think the country is going to go bankrupt before the situation comes under control, no matter who happens to win the next election. And what's the betting the lovely people in the EU turn their backs on us when that happens?
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Ed
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« Reply #1561 on: February 26, 2010, 06:38:54 PM »

What happens when we go bankrupt, then - do we get the national sofa and widescreen TV repossessed, or what? scratch
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« Reply #1562 on: February 27, 2010, 02:16:12 AM »

What happens when we go bankrupt, then - do we get the national sofa and widescreen TV repossessed, or what? scratch

Oddly enough, I happen to be in Phoenix, Arizona at the moment, attending a conference on foreign currency exchange. The national debt of the U.S. is around $13 trillion and heading ever skyward. The purchasing power of the dollar has decreased 95% since 1970, and while inflation is relatively low at the moment, it can only go up, given the rate the Fed (our central bank) is printing money.

I'm here to learn how to protect my assets from the erosion of my savings due to the hidden "tax" of a devaluing dollar.

The U.K. has been mentioned here the past couple of days: the pound sterling used to be the world's reserve currency, but that status gradually slipped away and now it's the US dollar in that position. But our day is coming to an end as well, as the world's confidence in the dollar ebbs away. The Chinese and Russian leaders have suggested recently that the dollar should be replaced.

Anyway, Ed, the debt in any country is due to its spending more than it takes in in taxes. The spending by your government on the NHS alone is probably the biggest factor, followed by your version of Social Security and the military budget. In the U.S., we've got Social Security, Medicare, "other entitlement programs," and "defense spending" as our big-ticket items. Wars are hideously expensive, and both our countries are involved in Iraq and Afghanistan.

When the government doesn't bring in enough taxes to pay for everything, it borrows money from its citizens or foreign countries in the form of issuing bonds. They sell these bonds, which are basically IOUs, and promise to pay the money back in a certain number of years, with interest. In the U.S., these bonds are called Treasury Bills, or T-Bills for short. Each nation that issues these bonds announces that it is going to hold an auction and then it sells them to all comers. I believe Germany has had four failed auctions in the past year, which means that they were unable to attract enough buyers for the number of bonds on offer.

As to who holds that debt, as I said, some of it is held in-country by people or organizations that have bought the bonds. But increasingly in the U.S. at least, the debt is purchased by foreign countries. In 1945, 0% of our debt was held by foreign countries. By the 1980's that number had increased to 15%, and today it's 49%. China and Japan account for nearly half of that. China holds $745 billion in U.S. debt, but she is trying to unload it and has been selling a lot of it to Japan.

Government doesn't produce anything; it simply redistributes wealth. It has a voracious appetite, and is constantly seeking to spend the money we earn on things it thinks we need. But governments are clumsy, inefficient bureaucracies rife with incompetence and corruption.

If a country defaults on its debt, its credit rating goes into the toilet and nobody will buy its debt. I think Iceland and Greece are recent examples of what happens when they can't pay. But in those cases, other countries came to the rescue. When a country goes into default, everyone holding its debt tries to sell, and its bonds become worthless. Countries, like individuals, need credit to survive. Without money coming in to pay for the social programs, the payments would have to stop. Mass chaos would ensue.

The only defense the citizen has against the devaluing of its county's currency is to buy hard assets (e.g., gold, silver, real estate) or foreign currencies that are stronger. Right now the Norwegian krone and Australian dollar are better bets than the U.S. dollar or the pound.

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« Reply #1563 on: February 27, 2010, 04:23:33 AM »

Interesting - thanks for the overview, Pharosian. It seems gold is still a good investment, then. In theory, the value of gold should stay relatively steady as the value of the pound and dollar fall.

I think we're going to see a period of change over the next few years, now the immediate banking crisis is over and people are taking stock and planning for the future. Energy is going to be a huge player in the future, even more so than it is now. The Russians and the Chinese are well placed to take advantage of this. For that reason alone I think our countries will soon be playing second fiddle to them on the world stage.

Britain's GDP seems to come mostly from the City of London - share and currency trading. Our manufacturing base has collapsed and nearly all the engineering jobs have been outsourced to places where the labour and benefits are cheaper. Britain actually makes very little these days. Our economy is mainly service based, and the money to pay for those services trickles down from the London Stock Exchange and from banking. This doesn't seem like a very secure way to operate - it makes us too dependent on a very narrow band of activity.

If those activities are now going into decline, it makes sense to invest whatever savings we have in investments outside of our own country, so rather than buying property in the UK or USA it might pay to buy in a more stable country, or invest the money in buying gold, or in shares in companies that drill for oil and gas. I dunno.

If you come away from your trip with any good advice, Pharosian, be sure to pass it on, please afro
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« Reply #1564 on: February 27, 2010, 04:47:31 AM »

Great explanation, Pharo. Much appreciated.

I'm in broad agreement with Ed, except I think in world terms the UK has long been off the top table. The empire is a thing of the past and I suspect it's only those of us within the UK who have any illusion that we remain important in world terms.

Maybe when we eventually do go bankrupt and the government can no longer raise money by selling bonds then the entire standard of living will drop far more dramatically than it is now. Instead of unrepaired potholes in roads, fewer university places, and long waiting lists in dirty and under-manned hospitals we'll see a rapid decline into an almost 'third world' status. When that happens our labour market will probably become very cheap again and then other countries will use that work-force in sweat shops and child labour and our land for deadly waste disposal and rubbish fills... We'll be little more than a dumping ground far away from the power-bases that should the occasional nuclear spill or chemical cloud erupt then no-one in positions of importance will be in much danger or worry...

In short the wheel will turn.

At least the bankers are still getting their big bonuses!

Del
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« Reply #1565 on: February 27, 2010, 05:13:43 AM »

Jeysus, Del - it's not time to hand out the razor blades just yet, me old mucker afro

I'm under no illusion that Britain has the same standing as when we had an empire, and it still surprises me that we have any influence whatsoever on the world stage, but for some strange reason, we do, and that's partly because London's a centre for banking and finance. However, that has come under threat from places such as Dusseldorf (if memory serves), which is more central than us in Europe, has better travel links and better communication links than London, so it remains to be seen whether the business will gradually ebb away offshore.
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Planning is an unnatural process - it is much more fun to do something.  The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression. [Sir John Harvey-Jones]
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« Reply #1566 on: March 01, 2010, 02:55:43 AM »

Thread killer, huh? grin

Anyway, back to the grind. I've got to be in two places at once today, as usual, but the good news is I'm only looking after six sites now... oh, hang on, seven, but one of those should be out of the way by the end of tomorrow. I find it hard to keep track of it all. Makes billing complicated, too.

My wife has landed herself a full time job with promotion prospects, so it's all change on the home front again. They offered her a job there after she did a couple weeks temping for them, but she turned it down, because there would be nobody to look after the kids during holiday time, and nobody to pick them up from school during term time if she worked until five. Their new person didn't work out, so they had my wife back temping again. Then on Friday they came to her with a tailor made offer - all the children's holidays off, and working nine till three during term time, with the same pro-rata pay as before. Pretty cool, huh? Just goes to show you get better deals when you don't really want/need what's on offer and are prepared to walk away.
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« Reply #1567 on: March 01, 2010, 03:12:55 AM »

Monday again? How come time accelerates as you get older?
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« Reply #1568 on: March 01, 2010, 03:57:07 AM »

Indeed it does, Geoff.

I had a pleasant weekend though. Went to watch the England Ireland Six Nations U20's match on Friday night, and Saturday afternoon went to see Gloucester v Sale in the Guinness Premiership. A great game! Saturday and Sunday morning I enjoyed my customary relaxed writing sessions before anyone got up. Managed a couple of thousand words. I have some time off later in March so I'm hoping to get the word count rolling along nicely again then. Sunday afternoon had a trip to the Cotswold village of Broadway. In between all of that I watched an episode of Carl Sagan's Cosmoss (a Christmas pressie that I'm really savouring), took the dog out for loads of walks, and spent a few hours practicing the guitar.

Shame the entire week can't be spent in such ways!

Derek
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« Reply #1569 on: March 01, 2010, 09:35:59 AM »

Pharosian's explanation was much easier to follow than all the guff on our news about Quantative Easing and how finances are like trains without wheels heading into a tunnel, or somesuch  Cheesy

I'm extremely, genuinely busy for the first time in ages...been working on an anthology proposal with Bill Tucker/grinder (who's working on a couple of current anthos for Library of the Living Dead) which will be immense if we're allowed to do it, and I've been offered a *different* promotion at work, but this one's still casual hours like my current job there.  I'm also going to tell the Job Centre to shove it up their arse pretty soon because I've signed up with a company my friend's with, and they have casual hours going for 'positive playworking' (looking after kids in schools) as well as work in kid's care homes (where I was recently).  Phew!  Busybusybusybusy!
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« Reply #1570 on: March 01, 2010, 11:17:04 AM »

I used to delve into the macro economics of running a country (needed to for A level a million years ago), which is totally different from how to run a family or a business, but I am too easily bored with it - sorry.

Dunno how I deserved it but my pieces feature in two places on the home page of http://www.kalkion.com this week. I write a regular column there and this month it's on the suspicious closure of the MoD UFO investigations unit and a little report of a sighting of my own.
 And Exit gets a plug.

Geoff
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delph_ambi
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« Reply #1571 on: March 01, 2010, 04:22:13 PM »

I'm just back from a week in Twickenham. The place was full of people in funny hats on Saturday. Dunno what that was all about...
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desertwomble
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« Reply #1572 on: March 01, 2010, 11:13:11 PM »

Welcome back, Del!

I'm sure there's a short story or two in Twickenham and funny hats!

DW Cheesy
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« Reply #1573 on: March 05, 2010, 04:17:38 AM »

I'm always moaning about Mondays in this thread. So here it is - Friday! Yeahhh!!  cheers

Looking forward to the weekend. No major plans, but hopefully the weather will be as beautiful as it is today and I can get out on a decent bike ride. Will try and progress the WiP by a few thousand words, listen to the big game on the wireless, and enjoy a lie-in untill 8.00. Superb  azn

Derek
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« Reply #1574 on: March 05, 2010, 06:42:48 AM »

I'm off to Nottingham this afternoon to spend the weekend with my girlfriend (it's her birthday).  And by a happy cowinky-dink my friend's roller derby team are having a fundraiser in one of Nott's best rock pubs tomorrow night!  And on Monday I get to unveil the submission call for an IMMENSE anthology that'll be put out by the Library of Science-Fiction and Fantasy (a division of Library of the Living Dead), which I'm *very* excited about!  WOOOOOOOOOOOOP!
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