tag:blogger.com,1999:blog-22974616.post5028821006925772151..comments2023-10-02T14:33:18.136+01:00Comments on The Very Fluffy Diary of Millennium Dome, Elephant: Day 3668: Economic Credibility Means Knowing the Difference Between DEFICIT and DEBT - A Brief HistoryMillennium Domehttp://www.blogger.com/profile/08430269096817934037noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-22974616.post-4213122914869988082011-01-21T11:52:47.246+00:002011-01-21T11:52:47.246+00:00Fluffy one, thank you for this. For your next topi...Fluffy one, thank you for this. For your next topics, can I suggest you do interest rates and inflation?Anonymoushttps://www.blogger.com/profile/04988201531739344840noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-14195428619056396592011-01-21T10:14:37.075+00:002011-01-21T10:14:37.075+00:00Dear Mr Radar,
You put it very succinctly; I coul...Dear Mr Radar,<br /><br />You put it very succinctly; I couldn't put it better myself - in fact: I didn't!<br /><br />{And don't worry, no one noticed ;)<br /><br />Since liabilities are credits (or negatives in the books), we read your Assets + Liabilities as adding a positive to a negative amount :)<br /><br />Anyway, Daddy Richard's been banging on about ASSETS = LIABILITIES, which is SIMPLER, but only really true in accounts in Frenchwhere the Shareholders' Equity is included as a liability!<br /><br />Mind you, it's probably because he HAS been doing accounts in French!<br /><br />Of course you are right, in English Accounts the Balance Sheet balances the Net Assets (ASSETS - LIABILITIES) = Equity.}Millennium Domehttps://www.blogger.com/profile/08430269096817934037noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-36716709345158592202011-01-21T07:18:31.930+00:002011-01-21T07:18:31.930+00:00Note to self don't post on political blogs whe...Note to self don't post on political blogs when drunk, you make stupid mistakes:<br /><br />*Assets - Liabilities = Equity<br /><br />or<br /><br />Assets = Equity + Liabilities.<br /><br />The point still stands thought that there are three aspects to the equation and as such an increase in debt (liabilities) doesn't always increase assets, in fact it can even be offset by a reduction in another liability. Economist's assertion was very basic.Radarhttps://www.blogger.com/profile/03576211677243672083noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-91700785010104482822011-01-20T23:40:17.945+00:002011-01-20T23:40:17.945+00:00Mr Economist I fear you are a bit confused. You r...Mr Economist I fear you are a bit confused. You repeatedly state that there are two sides to the balance sheet (or Statement of Financial Position as it is now known), however the actual formula is:<br /><br />Assets + Liabilities = shareholders equity.<br /><br />Therefore by increasing creditors (ie debt ie liabilities) you may not have actually increased assets, you may have just reduced shareholders equity. This is done very simply by expenditure (and therefore reduction in retained profits).<br /><br /><br />And surely you say Labour only borrowed to spend on capital projects? Surely if these capital projects needed to be run then the savings should have been made from reduced expenditure. To govern is to choose, they had a choice, they decided to have their cake and eat it. It's typical economic theory that a government will always spend more than it should as this will make them more electable and if they don't get elected then the other side can clear up the mess.Radarhttps://www.blogger.com/profile/03576211677243672083noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-58363202484936141622011-01-20T14:18:06.711+00:002011-01-20T14:18:06.711+00:00Dear Mr Gareth,
Thank you for saying in 76 words ...Dear Mr Gareth,<br /><br />Thank you for saying in 76 words what it took me 5460!<br /><br />And excellent summary; we should use it more!Millennium Domehttps://www.blogger.com/profile/08430269096817934037noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-38667937533230556222011-01-20T14:16:12.588+00:002011-01-20T14:16:12.588+00:00Dear Mr economist (or is it Ms?),
Um, thank you f...Dear Mr economist (or is it Ms?),<br /><br />Um, thank you for your contribution; I have composed what Daddy Alex calls a "very brief" <a href="http://millenniumelephant.blogspot.com/2011/01/day-3670-extremely-simplistic-and_20.html" rel="nofollow">reply</a>.Millennium Domehttps://www.blogger.com/profile/08430269096817934037noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-83075048181228281352011-01-20T14:14:03.048+00:002011-01-20T14:14:03.048+00:00Dear Mr Mark,
Thank you very much, and thank you ...Dear Mr Mark,<br /><br />Thank you very much, and thank you for the link also. I'm very glad you found it helpful!Millennium Domehttps://www.blogger.com/profile/08430269096817934037noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-4677121437823255122011-01-20T00:50:35.978+00:002011-01-20T00:50:35.978+00:00If I may offer the metaphor that just occurred to ...If I may offer the metaphor that just occurred to me (in the appropriately elephantine voice...)<br /><br />Prof Keynes said you should SAVE FOR A RAINY DAY. Mr Frown said HE'D ABOLISHED THE RAIN!<br /><br />PS Economist, on what earthly planet did Labour borrow money to fix our infrastructure? They got the PFI projects to do that so they could get it off their balance sheets and defraud (and I mean that in the criminal sense) the public.Gareth Aubreyhttps://www.blogger.com/profile/02420082463890261627noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-20745989674458992502011-01-18T02:46:54.020+00:002011-01-18T02:46:54.020+00:00"Mr Ed refuses to accept that spending more t..."Mr Ed refuses to accept that spending more than you earn when we were earning the most we ever have was a mistake."<br /><br />I'll say it again, there are two sides to a balance sheet. Labour borrowed money to fix lots of roofs while the sun was shining, including my Primary schools, Comprehensive, FE college and universities. Oh and my local swimming pool, train station, the council housing down the road and some other stuff I've forgotten.<br /><br />"But if you don't ever pay it back, then you create a RATCHET effect, where you keep adding to the debt in the good years and every crisis you jump to a new and higher level of debt: 60%... 80%... 100%... where does it stop?"<br /><br />Ed isn't arguing to never reduce the deficit or pay down the national debt. He is arguing for a slower pace which would lessen the deflationary impact on the economy, lessen the social impact (which is going to be huge particularly for those reliant on social services like my sister) and raise taxes through progressive taxation rather than regressive taxation (i.e. VAT). Labour's plan would involve harsh cuts but not as harsh as the coalitions at the cost of incurring a bit extra in debt interest payments.<br /><br />"Or, more to the point, where does the economy go Greek and IMPLODE?"<br /><br />The IMF estimates Britain could increase debt to GDP to 150%. But that is not what Ed is arguing for and at no stage under the Labour government or the past 8 months was the UK in danger of a sovereign debt crisis. <br /><br />But, hey, you carry on with the misinformation and childish name calling. Oh and helping the tories finish off what they started in 1979.economisthttps://www.blogger.com/profile/14454246035847138046noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-7509902991944847932011-01-18T02:46:33.905+00:002011-01-18T02:46:33.905+00:00"THAT is the issue that Mr Ed needs to explai..."THAT is the issue that Mr Ed needs to explain: why were they NOT paying back the debt in the boom years?"<br /><br />Because we paid down the debt-to-gdp to historical lows, debt interest-to-gdp were also much lower and the country needed investment. <br /><br />Are you arguing that before Labour spent any money it should have paid the debt down to nothing? If so, were you arguing that at the time?<br /><br />Are you arguing Labour shouldn't have borrowed to invest in capital projects? If so, were you arguing it at the time? And where would have found 2% of GDP to invest in that infrastructure?"But then the Labour Government's OTHER policy – of being intensely relaxed about people getting filthy rich – led to the casino banking disaster and all bets were off."<br /><br />Light touch regulation was/is a disaster. What extra financial regulations has coalitions implemented so far to stop another banking crisis?<br /><br />"But how does "economic growth" work? Well, if GDP is more next year than it was this year, then you can borrow the same amount in cash terms and it will be a smaller PERCENTAGE of the GDP.<br /><br />In other words, you've not really FIXED the problem; you've just used INFLATION to make it look smaller"<br /><br />Nope, you're way off mark here. Economic growth means increases in tax receipts for the government, which closes the cyclic part of the deficit. Osborne is banking on increased economic growth to help close the deficit. We have a "structural" part to the deficit because economists are guessing that around 5% of our trend growth has been destroyed by the financial crash. If we were to have an economic boom with above trend growth we could close the deficit without doing a thing.economisthttps://www.blogger.com/profile/14454246035847138046noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-812217808140078802011-01-18T02:46:00.231+00:002011-01-18T02:46:00.231+00:00An extremely simplistic and partisan economics les...An extremely simplistic and partisan economics lesson.<br /><br />"the REAL complaint is that Hard Labour were borrowing YEAR IN, YEAR OUT throughout the BOOM years while the economy was growing and NEVER PAYING ANY BACK."<br /><br />You'd better email Clegg and tell him that because that isn't the myth he is peddling. He, Osborne, Cameron, etc have repeatedly stated that Labour's overspending caused the *deficit* (a totally incoherent argument but what does that matter). The size of the national debt relative to GDP is not an issue, we had the 2nd lowest debt-GDP ratio of the G7 countries when the banks went tits up. Almost all western countries are facing increased national debts because of deficits resulting from the financial crash. Under Labour's deficit reduction plan net debt would have stabilized around 70% of GDP. As it will under the coalition's plan if their predictions are right.<br /><br />"But then from 2001 they spent more than they raised in taxes. Yes, I know I'm repeating myself but it's the MOST VITAL point. They spent more than they raised in taxes."<br /><br />Labour were perfectly open about doing this and your party supported it. Would a lib dem government since 97 have run surpluses and paid down the national debt? Well, your manifestos contained greater spending commitments in 97, 01 and 05 without the necessary tax increases to cover them - so I wouldn't have thought so.<br /><br />And you're forgetting there are two sides to a balance sheet, Labour only spent that borrowed money on capital projects. It paid for the infrastructure that had been neglected by the tories for 18 years. Those capital projects are an investment that will provide economic and social benefits for decades and it is not burdening the next generation to ask them to contribute to infrastructure that they will use. Hell, your party just burdened the next generation with ~£50,000 of personal debt at commercial interest rates!!!economisthttps://www.blogger.com/profile/14454246035847138046noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-58140306850319144342011-01-18T02:42:35.758+00:002011-01-18T02:42:35.758+00:00This comment has been removed by the author.economisthttps://www.blogger.com/profile/14454246035847138046noreply@blogger.comtag:blogger.com,1999:blog-22974616.post-74282041935045369792011-01-17T23:56:16.545+00:002011-01-17T23:56:16.545+00:00An illuminating blos post. Very good.An illuminating blos post. Very good.Mark Colehttps://www.blogger.com/profile/17030479655275524928noreply@blogger.com