tag:blogger.com,1999:blog-7132206171945839649.post887759878054910663..comments2024-02-13T11:11:28.246+00:00Comments on Bishop Alan’s Blog: Blowing bubbles in Hard Times?Bishop Alan Wilsonhttp://www.blogger.com/profile/13879516755776951638noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-7132206171945839649.post-83593469934874416472009-01-07T17:32:00.000+00:002009-01-07T17:32:00.000+00:00"Governments and corporations are immortal"?Would ..."Governments and corporations are immortal"?<BR/><BR/>Would you like to think about that a bit more?<BR/><BR/>Does that mean immortal like Czarist Russia or Yugoslavia.<BR/><BR/>Or does it mean immortal like Bear Stearnes and Woolworths?<BR/><BR/>A government which has over-borrowed becomes a candidate for default or hyper inflationAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7132206171945839649.post-66985069670152506612009-01-05T09:01:00.000+00:002009-01-05T09:01:00.000+00:00Many thanks for your stimulatng and helpful though...Many thanks for your stimulatng and helpful thoughts. I'm not entirely opposed to borrowing — hey, when I did school economics we were all Keynsians, and I have no antipathy to government borrowing per se under all circumstances. Sure, a bit of borrowing now may grease the wheels, BUT:<BR/>(1) We've all been there, done that excessively of late. In the UK we already have an average per capita personal debt of, I believe £12K ($18K) quite apart from mortgage debt, which is far higher than in the US because more people have it, and house prices have been far higher. It's high elasticity stuff, in economic terms, but this side of the pond, the math don't figure of increasing it that much higher. People are already groaning under the weight. They are not personally financially immortal, and repos are piling up now.<BR/>(2) Borrowing over a certain level is mathematically unsustainable, especially in an economy like the UK where personal consumers are already paying (sometimes as high as) 18-23%APR for their personal debt — at a time minimum lending rate is 2.5%. Thus are we all cranking megabucks into the banking system anyway, apart from our taxes, to a greater deree than US consumers who are averagely less indebted and would not be idiots enough to offer to pay those crazy credit rate premiums in the first place in quite the mass numbers we Brits have been. On the streets there is precious little room for manoevre here. The only ray of light is that the govt did get a reasonably good deal on its initial bank bailout deal — canny ol'Gordon. Canny enough? We'll see.<BR/>(3) Like Thomas L Friedman, whom I quoted about rebooting, I'm not entirely against borrowing in principle, but seeking a serious answer to the question "when we borrow, what is a worthwhile long term object, and what is throwing good money after bad?" For example the recent VAT reduction in the UK — has it helped, or not? We don't know, and all I'm calling is for an intelligent assessment of our long term objects rather than we borrow more willy-nilly. If we're doing a new deal, let's at least get a Hoover Dam out of it, not just chunter our way through another $600Bn. We can't go on doing that for ever, without some payback.<BR/>(4) I'm not sure anything is entirely immortal, except perhaps the phenomenon the scriptures draw attention to — the dog returns to its own vomit. Let's not do that.<BR/><BR/>Borrow strategically, sure, I called for that; but IMHO not unreflectively as we have been in danger of doing! Payback day always comes in the end (sounds apocalytic. It is)Bishop Alan Wilsonhttps://www.blogger.com/profile/13879516755776951638noreply@blogger.comtag:blogger.com,1999:blog-7132206171945839649.post-80777143081049907352009-01-04T14:55:00.000+00:002009-01-04T14:55:00.000+00:00Re point 1,Governments and corporations are immort...Re point 1,<BR/><BR/>Governments and corporations are immortal. They also have a presumably infinite, and presumably growing, stream of future earnings (from taxes and revenues respectively). In that sense, it is reasonable to expect them to carry a reasonable level of debt in perpetuity. It would even be reasonable for a government, say the United Kingdom, to increase its level of debt over the years. It would not be reasonable for a person to do the same because s/he will die and their stream of earnings will cease.<BR/><BR/>Debt fueled growth is <B>not</B> problematic per se - after all, it is reasonable for a person to borrow money to pay for college. I keep hearing the UK bishops saying not to borrow money to conduct an economic stimulus - the fact is that if the UK and the US don't, the consequences will probably be more dire.<BR/><BR/>Now, that's not to say that the UK isn't too heavily indebted. The US certainly is. The US absolutely must reduce its national debt over time. I respect Bishop Alan's contention that the UK must do the same, but what I'm hearing him and other bishops say is that the UK must not borrow. Borrowing <B>not</B> per se a Ponzi scheme. The mismanagement has occurred before this point. The Bishop should have opposed it then, not now.Whttps://www.blogger.com/profile/17851789276439393822noreply@blogger.com