What happened the last time UK debt hit 100%? I don't remember the 1960s as being particularly tough times for the UK, other than the IRA bombings.
Edit:
> Considered by conventional macroeconomic metrics, the 1960s can claim to be one of the UK’s most economically successful decades. GDP growth averaged 3.5%, unemployment 2.7% and inflation 3.5%. Real disposable household income per head was 25% greater by the end of the 1960s than it was at the end of the 1950s. However, such figures fail to take account of the trajectory of developments over the course of the decade, which tended largely in a negative direction. As well as slowing growth in real disposable household incomes and the declining profitability of industry, this trajectory can also be seen with respect to inflation and unemployment. As can be seen in table 3, inflation and the unemployment rate began the decade at 1.0% and 2.1% respectively, but gradually ratcheted up with every stop-go cycle. By 1969 inflation was 5.4% and unemployment 3.5%, a post-war high.
From https://lordslibrary.parliament.uk/the-uk-economy-in-the-196...
UK was actually reducing their debt as percentage of GDP throughout 1960s. It went down below 100% in 1961 and kept going down all the way to 1990 or so. The debt had originally climbed to over 250% as a result of financing the two world wars.
I don't know of one IRA bombing in the 1960s, never mind multiple "bombings".
Economists love debt. Some even like inflation… like Richard Koo: https://youtu.be/KRSpfG6hRTQ?si=qx8DcIm891hN5dTy
I just want some honesty and transparency. If you are going to let in migrants, do it transparently…
Japan's Debt also passed 250% of GDP in 2020. We really need to look into a lot deeper into the word GDP and Debt rather than just focusing on the 100% or 200% part.
It is somewhat alarming that almost no developed economy seems to be capable of having a balanced budget. Maybe it is an aftereffect of aging and bad birth rates - slow erosion of the taxpayer base.
Given that debt cannot grow to infinity, something will give way one day.
Remember that money is debt. If the government is in debt, it means that the balance of money in the rest of the economy is positive.
Government debt is a key part of making sure there's adequate money in the economy. Without adequate money to lubricate an economy, really bad things happen.
The holders of debt obligations are not necessarily the same as the debt interest.
I can loan you $100, at 200% interest. We will expand the economy. Good for me and bad for you. If that is a net benefit at the end of the day remains to be seen.
"net benefit at the end of the day"
Also, there is always day D+1, when benefits may turn into losses. But perhaps, on that day, the person who made the debt is going to be dead.
It all comes down to the cost of borrowing and the ROI. This is true for societies as well as individuals.
There's really no limit to the public's willingness to vote for politicians who overspend (at least in the USA) so we'll find out soon enough how high our debt can go. :(
People these days are absolutely mad. They’ll splash cash on anything without a second thought. They genuinely believe owning a house is an “investment” while they’re leasing a BMW or Audi just to drive to their nail appointments. These are the so-called “urban achievers.” But let’s not kid ourselves—the same hands getting those manicures will be the ones desperately clawing their way out of the financial mess they've created, like a scene out of Silence of the Lambs, begging mum for help with a student loan or parking fine, while the Deliveroo and Uber bills keep piling up.
People are utterly reckless and clueless when it comes to money—they haven’t a clue about the value of a pound, and frankly, they couldn’t care less. But they really should. Look at the ones with money to burn—spending on new hair, fresh nails, and a new dress for every wedding, while their partners splash out on another weekend getaway. It’s all a lifestyle choice, no different from the one the Bank of England seems to be celebrating. Same vibe, same level of obliviousness.
This seems slightly off-topic, describing solely young women and giving off Daily Mail/Richard Littlejohn vibes.
Some people are terrible with money, in a way that bears no resemblance to the way a central bank deals with monetary policy and macroeconomics, so I really don’t understand why you posted this little rant.
An economy does not have a “budget” and I hate hearing this comparison. The banks have the ability to print and redefine the meaning of money, therefore whatever you think the budget should or should not be is irrelevant.
What do you think a "budget" is? It is simply a spending plan developed by humans. Of course they exist. There can be real world consequences for having a bad budget.
What exactly are you trying to say?
All right, forget about a budget. In fact, even forget about money. Money isn't all that real; the real economy is about stuff. The economy has a maximum capacity for a given set of workers, resources, and technology. The basic economic question is, which stuff is going to be produced, and where is it going to go? Who's going to get it, and what are they going to do with it?
In a market economy, we use money to organize and manage that. But if we print more money, that doesn't create any more stuff at all. If the government is printing more money, two things are happening: The government is buying more of the stuff that's being produced, and the price of stuff is going up (because there's more money chasing the same amount of stuff). That means that everybody who's not the government is getting less of the stuff.
Now, that can be fine, if the government is doing things with the stuff that are going to pay society back down the road. If not, though, the government is just using up more stuff, leaving everybody else with less stuff, and causing inflation into the bargain.
So the question is: What made up that debt of 100% of GDP? Was it good investments that are going to pay the UK back? Or was it just waste?
It is meant as a metaphor for "a country with a developed economy".
"whatever you think the budget should or should not be is irrelevant."
Wow, that is an aggressive formulation. Most Western central banks are independent of their governments and don't routinely go on money-printing sprees. Given that with a larger debt, an ever rising portion of the budget goes towards interest payments, I certainly feel that the public debt is relevant for me. Money spent on interest cannot be spent on public goods which I and others would like to use.
Sweden has a debt-to-GDP around 30-35%, Denmark is below 30%.
Or Neoliberalism. Trickle down economics.
How rich are the rich now compared to the 1960s?
We can also pick other moments in time, such as the 1910s ...
Or we can look at the bigger picture. Countries vary a lot by their taxation rate, but it seems to have no correlation to their debt levels.
It seems that you can always spend a lot more than what you have in hand. The demand for public money is insatiable.
Yet another reason why I love Singapore: by law, the budget must be balanced over every parliamentary term. So, they never accumulate runaway debt. And that's before you count the $2.5 trillion reserves they have across Temasek, GIC, CPF, and MAS. And that's for a country of just 6 million people.
Even the Arab petro-states that literally scoop money from the ground haven't saved that much! (Highest is Saudi Arabia with $1 trillion.)
Edit: in case you're wondering, no, there's no catch: Singapore has ultra-modern infrastructure, great healthcare, and they're enviable in every way.
> Edit: in case you're wondering, no, there's no catch: Singapore has ultra-modern infrastructure, great healthcare, and they're enviable in every way.
The catch is that a lot of the money comes from being a tax haven.
So, why hasn't any other tax haven replicated what they have? Countries like New Zealand can easily replicate their strategy, given their small relative population, stable governments, etc. So, why not?
What’s the penalty if their budget isn’t balanced, and who pays it?
Canings, probably.
(yes, there is a bit of a catch, it turns out)
The catch is systemic competency
Most Western countries can be described as systemically competent, from Norway to New Zealand but on a per capita rate, and given the hand Singapore has been dealt (tiny island, no resources, etc.), they're an outlier.
The UK, which creates UK pounds, can pay off these UK pound debts any time it likes; any day between lunch and tea time that it decides to do so, it can.
Discussions of sovereign debts as if they were the same as debts owed by individuals are laughable.
The stated actions planned by Labour (generally impoverishing the populace and slowing the economy) will have the effect of increasing the notional indebtedness of the UK, not decreasing it.
Sovereign debt can be paid off, but not without consequences, which are the point of the concern.
Debt is not inherently good for an economy or country. It can be good if it is invested wisely with positive ROI exceeding the cost of borrowing. Borrowing for negative ROI obviously impoverishes the future for the benefit of today.
> which are the point of the concern.
Well, that's not in evidence here. There is maybe one commenter total in this thread other than myself who is NOT commenting as if these are real debts, that cannot be paid off since "the UK is broke" and will somehow cause the UK to be bankrupted or harassed by debt collectors.
> It can be good if it is invested wisely with positive ROI exceeding the cost of borrowing. Borrowing for negative ROI obviously impoverishes the future for the benefit of today.
Even this is a misunderstanding of sovereign debt. The UK can pay off all its debts by tea time. The cost of borrowing can therefore be $0. The UK is choosing to make payments to debt-holders for various reasons but none of them are "we need the money to make investments and this is the only way to get it, making payments to debt-holders". The UK does not need to borrow in order to spend.
I think you have an overly cynical view of the other posts, and are putting words in their mouth and mine.
Yes, governments have many options to allow spending besides borrowing. they do have real downsides which are not negligible, which is why they are done less often. The ability to do something, like "pay off debt by tea time" doesn't mean it is consequence free.
There are governments that fund spending primarily by printing new currency, and you can see what some of those effects are.
It's difficult to do that without stoking inflation.
Also Labour has a better track record on balancing the budget than the Tories.
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The UK, which creates UK pounds, can pay off these UK pound debts any time it likes
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The most important currency a country have is trust, this would cost way more trust than money.