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How to end the debt crisis (simple way) (For the convoluted way see here.)
All that is needed to end Britain’s debt crisis is for Nigel Farage to say this:
In the event of a Reform government being formed we will not honour any debt issued by the current government from this date forward.
This will have the following effects:
- No one will lend to the Labour government.
- The Labour government will have to live within its means
- The Labour government will have to make dramatic cuts for which they may or may not get the blame.
- If and when Reform come to power they will not have to worry about the debt crisis.
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No government borrows gold or silver any more – it borrows fiat money which it, the government and its Central Bank (in the British case the Bank of England), itself creates.
So why create the fiat (whim-command) money and lend it out to banks and other such – and then borrow it back at a higher rate of interest.
Why not just create the fiat money and spend it – YES that would be inflation, but no more inflation than is already created by creating it, lending it out, and borrowing it back again. And there would be no increasing debt.
The function of borrowing appears NOT to be to get the government money (again the government creates the fiat money in the first place), but rather to create artificial wealth for certain special interests.
By the way I am not advocating the above, I am not a fiat money supporter, but that is the logic of fiat money – if you support a fiat money system (I do not – but a lot of people do) then there is no need for a National Debt – indeed the great advantage of fiat money (as opposed to commodity money – such as gold or silver) is that it gets rid of the national debt.
To have BOTH fiat money and a national debt is insane – utterly insane. Or just very corrupt – a way of enriching certain interests whilst saying “we need to borrow money to fund government spending” – borrow money the government created in the first place.
If one looks, for example, at the United States – a more than 36 Trillion Dollar debt plus endlessly growing “Entitlements” then default is clearly inevitable – either an honest (open) default, or a disguised default via massive inflation.
The situation is much the same in the United Kingdom – there will be default, either open default or disguised default via massive inflation, long before the next General Election in July 2029.
By the way look at American house prices compared to medium earnings or food prices compared to medium earnings – now and in 1960 or even 1950.
The establishment (the Economist magazine and so on) keep talking about the wonderful economic growth and higher living standards people now have.
In 1960 or even 1950 the average (median) family could afford to buy a house, to eat well, and so on – all on one income. Now they can not. The wife has to go out to work (some “liberation”) and children are increasingly seen a luxury that can not be afforded.
Some people really are better off – but only the small “Cantillon Effect” class.
As for the United Kingdom – we were in deep trouble, with an out of control government, even in 1950. There was some real roll back of the state from 1951 to 1964 – but then everything really started to fall apart.
It was true that Margaret Thatcher did her best to fight the decay – but the lady was eventually betrayed.
It took eleven years for the establishment to get rid of Margaret Thatcher – it took them only a few weeks to get rid of (and horribly smear) Liz Truss.
I fear that future historians will see the brief Premiership of Liz Truss as the last effort to roll back statism – before the United Kingdom went down.
As late as 1938 British industry was right up there with the best in the world – this is not what people are taught (“hungry 30s” and all that), but it is the case.
Since World War II it is not just the Empire (never that important economically) that has gone – it is also the relative position of British industry.
The United Kingdom is not even in the top ten of manufacturing nations any more.
And Britain does not export much in the way of raw materials or food (indeed it imports these things – on a vast scale) so manufacturing is vitally important – making things, not the Credit Bubble frauds of “The City” (and so on).
And manufacturing is in terrible trouble – with “Net Zero” high energy costs and more “employment rights” (read unemployment producing regulations) about to kill off what is left of it.
Whoever wins the July 2029 election will be inheriting a nightmare.
And Labour has no reason to call an election before July 2029.
I do not believe that has “sunk in” yet.
I learned a concept in law school that has some bearing here.
“Odious debt” is debt taken on by an illegitimate government in the name of the powerless people.
The people have no obligation to repay such debt.
Let the creditors know ahead of time that they are about to become holders of odious debt if they lend to the government, and tell them to bugger off when they eventually try to collect.
> The United Kingdom is not even in the top ten of manufacturing nations any more.
Given our small population this is to be expected, but how do we fare if you make it per capita?
Who do we owe the money to?
I think the point is, no one, yet.
It’s like the filing of a lien. You have to give notice first. “You are considering loaning this person money because he claims it will be used on behalf of The People, and therefore you will look to The People for repayment. But, he is not acting on behalf of The People, and so we – The People – will not consider this debt to be ours. Act accordingly.”
In Alexander Sack’s formulation, debts may be dishonored if:
(Normally discussed in terms of IMF/World Bank loans to dictators.)
One interesting point: if a scheme such as this was in effect, bondholders and raters would need to pay attention to the issuance date of their previously-fungible UK bond portfolio. It would become similar to buying municipal debt in the US. You don’t want Springfield’s muni bonds that financed their perpetual-motion energy scheme.
Few years ago, I read somewhere that the “world” was in debt to the tune of several trillion dollars. It really hit home just how much we’ve divorced the idea of “debt” from “money” from “the economy”; like, who the fuck is the “world” in debt to?? Mars? Venus? Klingons? Jawas?
The purpose of money and debt is to smooth over the rough edges between “I have a bunch of goods that you need, you also have a bunch of goods that I could do with, or not, but Dave down the road might, and they don’t quite match up today, right now, on this given Friday, so we’ll draw up a ledger so that we can sort it out over time” – anything beyond that is just plain silliness.
If I owe my neighbour £100, I feel obligated to pay it back. If I owe “Big Steve” £200, I might feel *cough* somewhat pressured to pay it back, shall we say. Much beyond that, if someone has “made up” money and given it to me, we’re getting into silliness now, and I don’t feel hugely obligated to give them back something real that they made up in the first place – it’s that nonsense talk that a government economy is like a household economy, when they’re two very different things in reality.
One or two details to be borne in mind.
1. A lot of new government debt is issued to repay old government debt. It is not all borrowed to fund new toys. Thus such a proclamation – if successful – would cause an immediate default on existing debt, unless the printing presses were wound up to full power.
2. It would make Farage and Reform even more unpopular with the establishment (if this is possible) and so stack the decks agin him even more – ie it would make a Reform win even more unlikely. And since tweets can you jailed these days, Farage might find himself inside quite soon.
3. Y’all are forgeting the courts. Which would undoubtedly order a Reform government to honour the debts. Passing a law to stop the courts doing that would take a while – you’d undoubtedly need to use the Parliament Act as the Lords would not play ball – and during the at least a year that such a law would take to come into force, the courts could have done all sorts of thing to “safeguard” debtholders.
4. A much simpler scheme is to default in the 1923 German style. Not pretty, but effective.
I’ll just mention in passing that Spain defaulted on its debt five times in the 16th century. That would be the Spain that was digging up boatloads – literally – of gold and silver in the New World.
But the lenders just cranked up the interest rates and kept on coming back for more.
The really simple way is “F*ck you, cut spending.”
(Apologies for the language.)
Ted’s really simple way does not address the problem in question.
Mrs John Bull (the current Labour government) has a supplementary credit card on Mr John Bull’s account. It expires 8/29, but until then everything she runs up on the card, John Bull has to pay. Her card cannot be snipped up, and dealing with the problem with a bag of cement is regarded as a foul.
So the OP suggests telling the credit card company that you’re just not gonna pay what she runs up from now on. This is not an attempt to control spending once her credit card has expired and you’re in control. It’s intended to influence the behavior of the credit card company in accepting, or declining, Mrs Bull’s current charges. By making them fear that they won’t get paid if they accept the charges.
(Paul Marks, 17/01 4.25pm) “Whoever wins the July 2029 election will be inheriting a nightmare.”
Might it therefore suit both the Labour and the Conservative parties to be as useless and feeble as possible until then in order to drive a despairing electorate into the arms of Reform UK, so that Farage & Co are the fall guys left holding the parcel when it all blows up? (And we haven’t even mentioned the ticking timebomb of the public sector pension obligations that will be kicking in around then too).
Could they be that Machiavellian? Neutralise Reform by ensuring they win … just in time for everything to crash and burn?
bobby b wrote:
The flaw is you guys voted on Parliament a few months back. The People said their two bits then. It’s the same problem we have on this side of The Pond: we get to vote every two years and could easily fire the whole lot of the House, a third of the Senate, and every other election the President (to say nothing about the state and local levels). We’re on the hook for the debt regardless of what someone not in power says.
The write the bad checks, ostensibly, in our name and with our consent.
Presumably the very announcement that a Reform government in 2029 – likelihood say 10% – will not honour the new debts would have a say 5% impact on gilt prices.
If we’re lucky, even Reeves might baulk at paying the higher yields. What a great result, and without having to actually screw any lenders!