Cassandra on debt


This week on Facebook: I can’t think of an answer to a financial dilemma constantly driven by political imperatives and am not so conceited that I would ever try to suggest one¹Regression at my age is a common occurrence and my diffuse dissatisfactions increase day by day, with my belief that the world “is going to hell in a handcart”. On becoming an octogenarian next May what other view would I hold! Perhaps my interest in history is an expression of that regression. I constantly regard events as being a case of “one step forward two steps back” and history replete with stories of debt. 

I have written quite a lot about debt and it has strong links to Value of Money that I wrote about two weeks ago. Sufficient residual income is necessary if debt is not going to be incurred or increased. It seems to me that my post of 2013 Crises and Credit remains true, although the State deliberately conflates public and private debt, or at its best disregards consumer debt and the part it plays in the private debt crisis. Politicians focus on deficit financing using austerity as the pretext for reducing a budget deficit, but in reality a fiscal policy of austerity is used to maintain (or increasing) the level of deficit financing².

The watchdog estimated people in the UK owed about £18billion to government, utility companies, landlords and housing associations. Personal debt ‘costing the UK economy £900m a year’

This week on Facebook began with debt slaves (1), this caused me to wonder what the debt to gdp ratio actually meant. It may be a politically useful measure and one used by mainstream economists, but it seems to be of little use to a consumer of debt.

 The nation’s wealth is its assets minus its liabilities, not its assets regardless of its liabilities (such as GDP is). Why GDP Is Fake

I ended the week with global debt (5) and it would appear that neither the poor nor the wealthy nor politicians have an answer to the global debt crisis, with some more than others blind to the forecast of an impending scenario. State debt is not is not a new phenomena, but its modern equivalent (now seen as global debt) is well illustrated on the debt clock.

The Debt³

This is the debt I pay
Just for one riotous day,
Years of regret and grief,
Sorrow without relief.
Pay it I will to the end —
Until the grave, my friend,
Gives me a true release —
Gives me the clasp of peace.
Slight was the thing I bought,
Small was the debt I thought,
Poor was the loan at best —
God! but the interest!

 1. Here are the countries with the biggest debt slaves: There are many ways to measure household indebtedness and debt burdens. Comparing total household debt to the overall size of the economy as measured by GDP is one of the measures.

2. Ending austerity — stop the UK’s dependence on private debt: Since the 2008 financial crisis, unconventional monetary policy and austerity have prevented any systemic reforms of the UK economy to end its chronic dependence on debt. Instead, debt dependence became a strategic silence.

3. Everything You’ve Been Told About Government Debt Is Wrong: Because high public debt is believed to be so dangerous, politicians – especially in Europe – have given a higher priority to closing public deficits than restoring economies badly damaged by the worst financial crisis in living memory. The result has been a decade-long slump.

4. Consumer debt is at an all-time high: The composition of our debt has changed, and we’ve been better able to manage our obligations, thanks in substantial part to an extended period of low interest rates. But the crisis did not teach us a lesson about the perils of borrowing too much. Nor did it lead us to place more value on savings.

5. Global Debt: The Next Great Financial Crisis? The IMF (as well as the Organization for Economic Cooperation and Development and the Bank for International Settlements) is concerned that failure to follow more prudent fiscal policies, which bring fiscal deficits under control and reduce state reliance on debt, will mean less flexibility in dealing with the next economic downturn.

Referenced Articles Books & Definitions:

  • A text subscript above and preceding the title here, refers to a book, pdf, podcast, video, slide show and a download that is usually free.
  • Brackets containing a number e.g. (1) reference a particular article (1-5).
  • Sometimes a superscript is added to definition¹·¹ to indicate its context.
  • A long read url* (especially below) is followed by a superscript asterisk.
  • Occasionally Open University (OU) free courses are cited.
  • JSTOR lets you set up a free account allowing you to have 6 (interchangeable) books stored that you can read online.

¹How Debt Works(url*): The world is drowning in debt: personal debt, national debt, credit card debt, mortgage debt. Doomsday economists predict an imminent debt crisis that will plunge the world into another Depression, and TV talk shows are stuffed with experts extolling the latest scheme for living “debt-free.”

²Public Debt and Its Pros and Cons (url*): The public debt is how much a country owes to lenders outside of itself. These can include individuals, businesses, and even other governments. The term “public debt” is often used interchangeably with the term sovereign debt.

³You and your money (url/OU): An important aspect of personal finance is the way in which individuals and households manage their debt, how much it costs and the different types of credit they can or cannot access. This free course, You and your money, explores these issues, with respect to the wider, changing, social and economic context.

 

 

3 responses to “Cassandra on debt

  1. vallypee Oct 27, 2018 at 09:15

    There are some points that resonate with me too here, Peter. The focus on stamping on private debt rather than rebuilding the economy is one of them. However, I am a mere 64, so have less experience than you, but I still remember the days of waste not, want not and fixing things that were broken rather than buying new and becoming a throw away, consumer society. When did that start? And where do we draw the line between economy building and consumer overkill? We were encouraged to spend now, pay later for years when credit cards first appeared, but now we are being punished for it with austerity measures that don’t work. It’s all a mess, isn’t it?

    Like

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This site was created for members and friends of My Telegraph blog site, but anyone is welcome to comment, and thereafter apply to become an author.

TCWG Short Stories

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The Real Economy

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