Readers Question: Since the debt is mainly in the form of government bonds or gilts then it can only be paid back when the term of the bond terminates. What happens if there is not enough money to pay this back? Government bonds are a method for the government to borrow money. They sell bonds …
Readers Question: Do you believe the Coalition Government has used the right macroeconomic policies with regards to reducing the budget deficit? No. I’ve written a few times that I believe the coalition government made a big mistake in prioritising deficit reduction over economic recovery in 2010. The consequence of trying to reduce the budget deficit …
To what extent can the government help boost domestic industry and manufacturing? In recent weeks, several politicians have talked about their desire to help UK manufacturing and boost industrial production. It may be a noble endeavour to try and boost UK industry and rebalance the economy away from financial services to manufacturing. But, how practical …
Readers Question: National debt is now extremely high. However aren’t there different kinds of debt e.g that which funds current spending, that which funds investment in infrastructure and emergency (bank bail out etc) Surely it’s the first we should really be worried about and less concerned with borrowing that makes the economy more efficient such …
Another few graphs to look at the impact of the UK budget deficit on bond yields and interest payments. Government net borrowing for 2012-12 excluding Royal Mail pension fund transfer and Asset Finance Programme (AFP – the proceeds from Q.E) Government borrowing vs debt interest payments The very large deficits have had little impact on …
According to one Bond trading firm, austerity is a con and government spending hasn’t fallen significantly. (Telegraph) Government Spending 2011-12 – £681.4bn Tax 2011-12 – £558.1bn Deficit in finances – £123.3bn Changes in government spending 2009-10 +4.6% Changes in Government spending 2010-11 +0.3% Change in government spending 2011-12 -1.5% Tulllet Prebon, a bond trading …
Readers Question: In a non-recession situation, if a government reduces it’s borrowing and thus it’s spending, how can that have a depressing effect on the economy? Wouldn’t that money be either be loaned to someone else or spent to on goods and services by the people who have it? Yes. If an economy is growing …
The UK government has a national debt of over 55% of GDP. It finances its debt by borrowing from the private sector. Its debt is managed by the Debt Management Office DMO 1. By issuing government bonds (gilt edged stocks) demand comes mainly from non- bank financial sector e.g. insurance co. i) e.g. Treasury 10% …